HDFC Bank of India successfully acquires the country’s largest mortgage lender in a $40 billion takeover

HDFC Bank, India’s leading private lender, has successfully merged with Housing Development Finance Corporation (HDFC), the largest mortgage lender in the country. The merger, which received shareholder and regulatory approvals, officially commenced on July 1, placing the new entity in competition with the world’s largest banks.

On July 1, HDFC Bank, India’s largest private lender, successfully concluded its merger with Housing Development Finance Corporation (HDFC), the country’s leading mortgage lender. This merger positions the newly formed entity in direct competition with the world’s largest banks after obtaining necessary approvals from shareholders and regulatory authorities.

According to Soumya Rajan, CEO and founder of Mumbai-based Waterfield Advisors, the merged entity will rank as the fourth largest bank globally in terms of market capitalization.

It will rank below JPMorgan Chase, Industrial and Commercial Bank of China, and Bank of America.

Sashi Jagdishan, CEO of HDFC Bank, expressed that this is a significant milestone in their journey, stating, “I am confident that our collective strength will empower us to build a comprehensive ecosystem of financial services.”

In a press release, he asserted, “As we move forward, we will approach challenges as prospects, draw lessons from our experiences, and endeavor to set the standard for success and integrity in the financial services sector.”

The merger was successfully completed on Saturday, approximately 15 months after its initial announcement. HDFC Bank revealed in April of the previous year its plans to acquire Housing Development Finance Corporation (HDFC), its parent company and India’s largest home financing lender, in an all-stock deal worth $40 billion.

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Nilesh Shah, the Managing Director at Kotak Mahindra Asset Management, attributed the smooth execution of the merger to the existence of a “common culture” shared by both companies.

In the merger deal, HDFC shareholders will receive 42 shares of HDFC Bank for every 25 shares they currently own. As part of the process, HDFC will cease its operations on the Indian stock market on July 13.

With a market capitalization of approximately $172 billion, the newly formed entity, according to Rajan, will become the second most valued company in India, trailing only Reliance Industries.

Shah, speaking to CNBC, expressed that the collaboration of these two formidable entities is expected to have a significant influence on growth and the expansion of the client base in the future.

He emphasized that the aim should be for the combined entity to achieve an outcome greater than the sum of its parts. Rather than merely two or three, the goal should be to harness the synergies and create an even stronger organization than what already exists.

During a presentation to HDFC investors, the mortgage lender highlighted various synergies resulting from the merger. These include advantages such as accessing lower funding costs, operational efficiencies, and a broader distribution network for HDFC.

The presentation further revealed potential cross-selling opportunities, noting that 70% of HDFC’s customers currently do not possess a banking account with HDFC Bank. Additionally, among HDFC Bank’s customer base of 71 million, a mere 5% have mortgages from other providers, while a mere 2% have mortgages from HDFC itself.

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