Merger and Acquisition are part and parcel of corporate world. Sometimes this can result in a HUGE company. Recent merger of HDFC Ltd with HDFC Bank is a proof for the same.
- On 1st July 2023, HDFC Ltd (Housing Loan Company – Parent Company) has been Merged with HDFC Bank. And HDFC Ltd Shares would be DELISTED on 13th July 2023
- · As on 30th June 2023
- o HDFC Bank shares (Face value: Rs.1) was trading at Rs.1701
- o HDFC Ltd shares (Face value:Rs.2) was trading at Rs.2821
- · Every 25 shares of HDFC Ltd would be swapped (replaced) with 42 Shares of HDFC Bank on 17th July 2023
- · The combined entities market value would be US$ 172 Billion.
- · It would be the 4th largest bank in the world – behind JP Morgan Chase & Co, Industrial & commercial bank of China and Bank of America.
- · In one GIANT LEAP, HDFC Bank overtakes the market cap of SBI (US$ 62 Billion) and ICICI (US$ 79 Billion).
- · Post merger, HDFC Bank will have 120 Million Customers across 8300 branches and more than 1,77,000 employees.
- · 70% of HDFC Ltd customers do not have a HDFC Bank account.
- · And 2% of HDFC Bank customers have a housing loan with HDFC Ltd.
- · Thus, the merger gives HUGE Scope for growth – projected at 18% to 20%. This can result in the market cap DOUBLE in four years flat.
Impact on Investors:
- · (Retail) Investors can celebrate. It is a WIN-WIN situation for both company share holders.
- · International Investors (FII’s and FPI’s) now have another company in World’s TOP 100, beyond Reliance and TCS.
- · FPI’s may invest close to US$ 3 billion in the merged entity.
- · However, domestic mutual funds have a problem. As per SEBI norms, MF’s cannot hold more than 10% in a company. And many mutual funds have been holding 6% to 7% in both. This may FORCE them to sell some shares (Rs.40 Billion or US$ 0.49 Billion) to bring down their holdings to 10%.
After the initial price adjustments, HDFC Bank share holders
can hope for the best – given the synergies between the two companies.
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