HDFC Bank and HDFC Limited shares soar over 7% on news of HDFC Bank and HDFC Limited merger and this helped Nifty-50 shoot up over 250 points.
HDFC Limited share holders will be receiving 42 shares of HDFC Bank for each 25 shares of HDFC Limited while merging.
Post allocating shares of HDFC Bank merged entity to HDFC Limited then all shares of HDFC Limited will be cancelled.
Post merger, HDFC Limited shareholders will be holding 41% of shares of merged entity of HDFC Bank.
Merger should be approved by RBI, SEBI and couple of other bodies in India which is normal process in bank mergers.
HDFC Bank mortgage business will be expanding post merger as per HDFC Bank and HDFC management.
In the recent past of 2 years, couple of PSU banks has been merged in India.
So ideally for merging HDFC Bank Limited and HDFC into one entity, there should not be any major blockers.
One advantage is that HDFC on standalone basis not able to offer credit overdraft to mortgage customers. Post merger the management thinking they will be able to offer credit overdraft and couple of other financial products to mortgage customers.
So it will benefit merged entity and even the merged entity mortgage customers will be having more benefits.
However the entire process of merging will be taking lot of time.
Merged entity will be able to provide loans to a wider group relatively. It will contribute to have better economic activity in India as there is more credit flow to individual customers and business entities.
This news mainly helped Nifty-50 to gain over 250 points as HDFC Bank and HDFC are key components of Nifty-50.
Both shares gained over 7%.