Highlights:
The HDFC- HDFC bank merger announcement by the chairman saying it will create a banking conglomerate with a combined balance sheet of about Rs 17.87 lakh crore.
News:
HDFC Chairman Deepak Parekh said at the press conference that it will not only fortify the company against competitors but also make its mortgage offering competitive. He further stated that HDFC and HDFC Bank will merge, with HDFC Bank having no promoter. In recent years, there was a harmonization of different laws for banks and non-banking financial companies (NBFCs) allowing HDFC Bank and HDFC Ltd to merge.
“Regulatory improvements help in reducing merger hurdles over the past three years,” Parekh said. “Both banks and nonbank financial institutions are the classifications of nonperforming assets. NBFCs’ upper layers will be comparable to banks. “There are fewer regulatory arbitrages now,” he said.
According to Parekh, the merger will make the mortgage offerings of the merged entity much more competitive. “There will be a reduction of financial challenges of both businesses with their combination.”
About the HDFC-HDFC Bank Merger
There were gains of over 15%, 13%, and 6% for HDFC, HDFC Bank, and HDFC Life, respectively. On the Nifty 50, Bajaj Finance and Hero Motocorp were also among the top gainers. The top laggards were ONGC, Infosys, IndusInd Bank, Maruti, and M&M.
“The HDFC-HDFC bank merger is an unprecedented mega-merger that will benefit all stakeholders,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated. Both companies’ shareholders stand to gain a lot of money, as evidenced by the huge rises in their stock prices.
For Shareholders
Despite today’s sharp spike, HDFC twins’ stock prices may remain stable despite today’s sharp spike. “From a valuation standpoint, the HDFC twins are only attractively priced in a highly valued market right now,” Vijayakumar remarked.
Financials In Focus
Except for Nifty Realty, all indices were in the green on the sectoral front. Following the announcement of the HDFC merger, financials have gotten a lot of attention. Nifty Financial Services gained nearly 6%, while Nifty Bank gained more than 4%. Nifty Private Bank is currently trading roughly 4% higher.
HDFC Bank Merger News Broader Indices
Nifty Midcap 50 was up 0.67 percent, while Nifty Smallcap 50 was up 1.24 percent, indicating that broader indices were also in the green. The S&P BSE Midcap index increased by 0.87 percent, while the S&P BSE Smallcap index increased by 1.27 percent. The volatility index increased by 0.80 points to 18.58 points.
The Impact On Rivals
However, the prediction is that the merger will boost Axis Bank Ltd’s advantage over rival private-sector rival ICICI Bank Ltd in terms of total assets. According to data as of December 31, the amalgamated HDFC Bank will have a loan book of $17.9 trillion, far ahead of ICICI Bank’s $8.14 trillion and Axis Bank’s $6.65 trillion. At the end of December, India’s largest lender, the State Bank of India (SBI), had a total loan of 26.64 trillion rupees.
Therefore, this is what the HDFC-HDFC bank merger news is. Now, let’s have a look at the two most common questions:
How Will The Ownership Change?
HDFC Limited’s ownership of HDFC Bank will cease following the merger. Additionally, public shareholders will be the exclusive owners of HDFC bank. HDFC Limited’s existing shareholders will own 41% of HDFC Bank.
How Will the Merger Benefit The Two Entities?
While the move will help them utilize their distribution across urban, semi-urban, and rural regions, it will also boost their capacity to cross-sell products to a bigger consumer base. The combined financial sheet of Rs 17.87 trillion and the net value of Rs 3.3 trillion will allow for higher-scale underwriting.
Overall, the HDFC-HDFC bank merger is a win-win opportunity for all the stakeholders. Stay tuned with us to get more business technology news.
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