HDFC Subsidiaries’ IPO To Be Decided After Completion of Merger: HDFC Bank CEO Jagdishan

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HDFC Bank Managing Director and CEO Sashidhar Jagdishan has said the lender will only consider a public listing of its brokerage and non-bank finance company subsidiaries after the completion of the HDFC-HDFC Bank merger. The $40-Billion amalgamation, which was announced in April, might take around 18 months to complete.

“The IPO (initial public offering) plans (of HDFC Securities and HDB Financial Services) are something that we will contemplate after we have absorbed (the merger)… we’ve got directions from the regulator, after we absorb as and when the merger happens. And then we will think about it,” Jagdishan said in response to questions from shareholders at HDFC Bank’s 28th annual general meeting last week.

HDFC Bank last week also informed that the insurance sector regulator PFRDA has granted approval for change in status/ constitution pursuant to the Scheme in accordance with the PFRDA (Point of Presence) Regulations, 2018, subject to the conditions mentioned therein.

“The scheme remains subject to various statutory and regulatory approvals inter alia including approvals from the Competition Commission of India, the National Company Law Tribunal and the respective shareholders and creditors of the companies involved in the Scheme as may be required.”

Earlier this month, the merger also got a go-ahead from the Reserve Bank of India (RBI) and stock exchanges BSE and NSE.

In April 4, the bank announced that its parent HDFC will merge with it for enabling seamless delivery of home loans and leverage on the large base of over 68 million customers of HDFC Bank and inter alia improve the pace of credit growth in the economy.

After the merger, HDFC Bank will become one of the largest banks in the world. This deal is worth about Rs 4.53 lakh crore, which is the second-largest business deal so far in 2022 this year. On completion of this deal, after the merger, the market cap of the bank can reach closer to Rs 15.12 lakh crore. This merger of HDFC and HDFC Bank is expected to be completed by the second or third quarter of the fiscal year 2024.

After the amalgamation, the lender will be 100 per cent owned by public shareholders, whereas the existing shareholders of HDFC will own 41 per cent of HDFC Bank. The subsidiaries and associates of HDFC will shift to HDFC Bank. This means that HDFC will acquire a 41 per cent stake in HDFC Bank through the transformational merger.

Every 25 shares held by HDFC shareholders will fetch them 42 shares of the bank. The merger created an entity that will have a market cap of Rs 12.8 lakh crore and a balance sheet of Rs 17.9 lakh crore.

While announcing the plan in April, HDFC Chairman Deepak Parekh termed it a “merger of equals” and attributed tight RBI regulations on non-banking finance companies (NBFCs) as a major reason for the merger.

Following the merger, there will be a combined customer base of HDFC Bank and HDFC and they will be offered a number of financial products — mortgages or home loans, life insurance, savings accounts, health insurance, credit cards and general insurance, among others.

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