Mumbai — India’s largest private lender, HDFC Bank, and its top shareholder are merging in a $40bn deal, the country’s biggest, creating a financial services titan to better tap rising demand for credit in the economy.
“This is a long-awaited merger and will be beneficial for both the companies but particularly for HDFC Ltd that was competing with the likes of State Bank of India in a competitive home loan market, leading to pressure on margins due to disadvantages to its cost of funds,” said Asutosh Mishra, research analyst at Ashika Stock Broking.
Under the terms of the deal, shareholders of HDFC Limited will receive 42 shares of the bank for 25 shares held. Existing shareholders of HDFC Limited will own 41% of HDFC Bank, which will become a fully fledged public company as the housing finance company’s stake in the lender will be cancelled in the deal.
The planned merger will expand HDFC Bank’s loan book by 40% and the combined company’s market value will rise to about $160bn at current prices, Jefferies said in a note.
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