a match made at home

it was a marriage seven years in the making. on April 4, it was made official. HDFC and HDFC Bank are merging to create India’s third-largest company. 

HDFC Chairman Deepak Parekh called it a ‘merger of equals’. it makes sense for the sister entities to have one consolidated company. the new entity gets to focus deeper on the housing loan business across India and cross-selling also becomes easier.  

what’s the deal?

HDFC will acquire 41% of HDFC Bank through the $40 billion deal. just as home sales zoom in India, the merger will help the Bank compete with the State Bank of India in the property loan space. 

competition is heating in the private banking space with analysts favoring ICICI Bank. rather than deploying resources in two similar businesses, HDFC found it wiser to bring their strengths together. 

under this deal, HDFC Bank’s 68 million customers will get direct access to home loans. since the bank has a large base of customers, home loan rates could also get cheaper. through the existing branch network, account holders in semi-urban and rural areas will get a better deal too. 

happy surprise for investors

the merger came as a happy surprise for investors. HDFC Bank shares were up 9.81% and HDFC shares rose 9.15% on BSE on April 4. 

the market was waiting for this deal to go through for years. a window of opportunities opens up, including the ability to lend to big-ticket infrastructure projects and more foreign investors. 

as a shareholder, you’ll get 42 shares of HDFC Bank for every 25 shares of HDFC Limited. with a combined balance sheet of $237 billion, this is a coalition that’s a win-win for all.