PFRDA nods to merger proposal of HDFC and HDFC Bank

HDFC Bank announced on Friday that it had received the approval of the pension fund regulator PFRDA for the proposed merger of its parent company HDFC Ltd with itself.

Touted as the largest deal in Indian corporate history, HDFC Bank agreed on April 4 to acquire the largest domestic mortgage lender in a deal valued at about $40 billion, creating a financial services titan.

The Pension Funds Regulator and Development Authority (PFRDA) “by letter dated July 7, 2022 (received by us on July 15, 2022) approved the change of status/constitution under the system set out in the PFRDA (Point of Presence) Regulations , 2018, subject to the conditions set forth therein,” HDFC Bank said in a regulatory filing.

The merger proposal is still subject to various legislative and regulatory approvals, including from the Competition Commission of India (CCI), the National Company Law Tribunal (NCLT), other relevant authorities and the companies’ respective shareholders and creditors, it said.

The planned merger has already been approved by both stock exchanges BSE and NSE as well as the Reserve Bank of India (RBI).

The proposed company will have a combined asset base of around Rs 18 crore. The merger is expected to be complete by Q2 or Q3 of FY24, subject to regulatory approvals.

Once the transaction is effective, HDFC Bank will be 100 percent owned by public shareholders and existing HDFC shareholders will own 41 percent of the bank. Each HDFC shareholder receives 42 shares in HDFC Bank for every 25 shares held.

The BSE observation letter states that the company is recommended to disclose the details of any action taken by Sebi or any other regulator against any of the companies, its directors/promoters and the promoter group in the petition to be filed with the NCLT.

The company ensures that no changes are made to the system’s design without Sebi’s express written consent, other than those mandated by regulators or courts, it said.

The combined company is being told that the proposed shares to be issued under the plan are mandatory only in dematerialized form, it said.

After the merger, the combined balance sheet will be Rs 17.87 lakh crore and net assets will be Rs 3.3 lakh crore as of December 2021 balance sheet.

As of April 1, 2022, the market capitalization of HDFC Bank was Rs 8.36 lakh crore (US$110 billion) and HDFC Rs 4.46 lakh crore (US$59 billion). After the merger, HDFC Bank will be twice the size of ICICI Bank, which is now the third largest lender.

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