InvestorQ : Is it true that the HDFC Bank – HDFC merger could happen sooner than anticipated?
ishika Banerjee made post

Is it true that the HDFC Bank – HDFC merger could happen sooner than anticipated?

1 month ago

While announcing the quarterly results (rather impressive numbers), the HDFC Bank CFO indicated that the proposed merger with HDFC Ltd could happen a quarter earlier by the first quarter of FY24 itself. That is good news and would be indicative of the speed at which the bank, regulators and the government have moved their approval process. It needs no reiteration that the proposed merger between HDFC Bank and HDFC Ltd will create a private banking giant that is almost unrivalled in market capitalization. The merger has been approved by the CCI, NCLT and the RBI and shareholder approval will be sought n 25-Nov.

The process is fairly long unwinding even after all the approvals. The NCLT process takes about 8-9 months after the shareholder approval has been obtained by the bank. So one can add about 10 months from December 2022 and then a few more months for the stock exchange approvals and for the actual execution. Originally, the merger was to be fully consummated by September 2024, but now it is likely to be completed before June 2024. Considering that the merger would create a $40 billion deal, the approvals have been processed quite fast and that is a good thing for future big deals in India.

Of course, there are still regulatory and compliance open ended items. There will be conditions on reduction of leverage, priority sector lending, CRR and SLR maintenance on enhanced asset size, dilution of equity etc. Most likely, HDFC Bank would be seeking more time from the RBI to meet these targets considering the size and importance of this deal for the Indian financial system. Also, HDFC Bank must plan a lot of capital raising over the next few quarters to fill up the capital adequacy gaps. Till now things have gone in a relatively smooth manner and if the new timelines are met, it would really be a record of sorts.