HDFC Bank to be World's 4th Most Valuable Lender

HDFC Bank will be the fourth most valuable bank in the world in terms of market capitalisation after the merger with mortgage lender HDFC. According to Bloomberg data, the merged entity will have a market capitalisation of $ 172 billion, the most after JPMorgan Chase, Industrial and Commercial Bank of China (ICBC) and Bank of America.

Currently, JPMorgan Chase has a market capitalisation of $ 417 billion. while ICBC and Bank of America are valued at $ 228 billion and $ 227 billion, respectively. ICICI Bank, India's second most valuable bank, had a market capitalisation of $ 80 billion at the Friday close, while state - owned State Bank of India (SBI) was valued at $ 62 billion. The merged entity will be India's second most valued company after Reliance Industries, which had a $ 210 billion market cap on Friday.

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Global index services provider FTSE will replace HDFC in its indices with HDFC Bank closure of the merger. The bank is not part of the index currently. There will be no change in weight and the move will not result in any fresh inflow now.

'$1.3-b inflow Likely After Sept Review'

But the 10% - plus headroom created for fresh overseas investments could trigger an inflow of about $ 1.3 billiion into HDFC Bank shares after the forthcoming review scheduled in September, said analysts.

"At the fothcoming review in September, FTSE will combine the original HDFC Bank shares provided sufficient liquidity, no foreign ownership restriction, and 10% - plus foreign headroom is available," said Abhilash Pagaria, head of Nuvama Alternative and Quantitative Research.

FTSE, in a circular on Thursday, said HDFC Bank would replace HDFC in its global equity indices on the effective date of the merger. It added that the eligibility screenings for HDFC Bank would be assessed in the subsequently quarterly review, including liquidity and minimum foreign headroom requirement screens as a constituent. It will also review foreign ownership restrictions attributed to HDFC Bank prior to the merger for an accordance with index guidelines.

The merger will come into effect on July 1, while July 13 will be the record date for determining the shareholders of HDFC who will be issued and allotted the shares of HDFC Bank. According to the merger terms , eligible HDFC shareholders will receive 42 new HDFC Bank shares for every 25 shares held.

Shares of HDFC, which rallied 5% in the past month, ended 1.5% higher at Rs. 2,822 on Friday, while HDFC Bank gained 4% in the past month and closed at Rs. 1,702, up 1.5% , on Friday.

July 13 cut-off Date; HDFC Bank to give 42 shares for 25 of HDFC

All share and warrant holders of HDFC as of July 13 would be eligible for HDFC Bank stock. HDFC Bank will issue 42 shares for every 25 held by HDFC investors, as per the plan approved by the boards Friday evening.

Boards of HDFC Bank, HDFC Give Nod to Merger Plan

The Boards of HDFC and HDFC Bank Friday approved the merger between the two institutions, creating the world's fourth - biggest bank by market value behind bulge - bracket wall Street lender JPMorgan, China's ICBC and Bank of America. The merger takes effect Saturday.

All share and warrant holders of HDFC as of July 13 would be eligible for HDFC Bank stock. HDFC Bank will issue and allot eligible shareholders 42 new equity shares for every 25 held by investors in HDFC as on July 13.

Separately, July 12 has been set as the date for the transfer of non - convertible debentures (NCDs) of HDFC in the name of HDFC Bank. Commercial papers of HDFC will be trasferred to HDFC Bank from July 7.

"This is a defining event in our journey and I'm confident that our combined strength will enable us to create a holistic ecosystem of financial services,"said Sashi Jagdishan, CEO, HDFC Bank. "As we navigate the path ahead, we will embrace challenges as opportunities, learn from our experiences, and strive to be the benchmark, of success and integrity in the financial services industry."

From a market capitalisation of less than Rs.500 crore as a mortgage firm in the 1980s, the market value of HDFC Bank combined will register a dominant Indian presence on the high table of global finance by creating the world's fourth - biggest bank, Bloomberg calculations showed.

$ 200 B Group M - Cap

The combined market cap of all HDFC listed entities currently is Rs. 16.63 lakh crore,or about $ 200 billion.

"The larger networth would allow greater flow of credit into the economy. It will also enable underwriting of larger ticket loans, including of infrastructure loans and contribute further to nation building and employment generation," the two entities said in a joint statement.

All employees of HDFC will become HDFC Bank employees from saturday. After the merger, HDFC Bank subsidiaries will include HDFC Securities, HDB Financial services, HDFC Asset Management Co, HDFC ERGO General Insurance Co, HDFC Capital Advisors and HDFC Life Insurance Co.

The merger was announced about 15 months ago on April 4, 2022, ending two decades of speculation on their eventual union.

The National Company Law Tribunal (NCLT) approved the merger on March 17. The bank had received the first approval from the Reserve Bank of India (RBI) in July 2022, and then the merger got the green light of other regulators such as Sebi, the Pension Fund Regulatory and Development Authority and the Competition Commission of India. Shareholders of HDFC and HDFC Bank also approved the merger.

The bank had made certain for bearance requests to the central bank on meeting statutory liquidity ratio (SLR) and cash reserve ratio (CRR) requirements, requests the regulator did not grant.

Additional SLR - CRR Funds

HDFC Bank's internal estimates showed the merger would lead to SLR - CRR requirements of an additional Rs. 70,000 crore, along with an incremental Rs. 1.75 lakh crore that, would be needed to meet priority sector lending (PSL) norms.

The RBI has permitted the bank to meet priority sector lending requirements in a staggered fashion over three years, the bank said in an exhcange notification.