The first home finance company HDFC ceased to exist from today: merged with HDFC Bank, it became the fourth-largest bank in the world

On July 1, Housing Development Finance Corporation (HDFC) and HDFC Bank completed their merger, marking the end of HDFC, the country's first home finance company. The boards of both companies had given final approval to the merger in a meeting held after the market closed on Friday.

HDFC Bank announced the merger on Twitter, stating, "With the merger of India's number one private sector bank and India's number one home loan company, we have joined the world's leading financial institution. On this occasion, we rededicate ourselves to serving the people who have made this milestone possible – you, our customers."

The merger was announced on April 4, 2022. The objective of the merger is to make housing loans available in more branches of HDFC Bank. Prior to the merger, HDFC's Vice Chairman and CEO, Keki Mistry, had mentioned that the delisting of HDFC shares would be effective from July 13. As a result, shares of the Housing Finance Company will be removed from the Stock Exchange, and shares of the combined company will begin trading from July 17.

As of June 30, the market cap of HDFC Bank and HDFC was reported to be Rs 14.74 lakh crore. However, official information regarding HDFC Bank's market cap has not been provided yet.

The top ten banks in India ranked by market capitalization are as follows:

HDFC Bank - Rs 14.74 lakh crore

ICICI Bank - Rs 6.53 lakh crore

SBI - Rs 5.11 lakh crore

Kotak Mahindra Bank - Rs 3.67 lakh crore

Axis Bank - Rs 3.04 lakh crore

IndusInd Bank - Rs 1.07 lakh crore

Bank of Baroda - Rs 98.41 thousand crore

IDBI Bank Limited - Rs 59.48 thousand crore

Punjab National Bank - Rs 56.88 thousand crore

Canara Bank - Rs 54.74 thousand crore

Now, let's explore the impact of this merger on customers, shareholders, and employees of HDFC.

Impact on shareholders:

Under the merger, shareholders will receive 42 shares of HDFC Bank for every 25 shares of HDFC. For example, if an investor holds 10 shares of HDFC Limited, they will receive 17 shares after the merger.

Impact on employees:

The merger is not expected to have a significant impact on the employees of both companies. The group's chairman had previously assured that there would be no layoffs, as HDFC Bank values its employees. Additionally, there will be no reduction or deduction in employee salaries.

Availability of HDFC services in HDFC Bank branches:

All services provided by HDFC will now be available in HDFC Bank branches. Customers who have taken loans from HDFC will become customers of HDFC Bank, and they will continue to pay their EMIs as per the existing terms and conditions.

Continuation of banking facilities:

HDFC Bank customers will continue to receive banking facilities as before, and there will be no changes in the banking services provided.

Difference between HDFC and HDFC Bank:

HDFC is a housing finance company that offers loans for purchasing houses, shops, and other properties. HDFC Bank, on the other hand, handles all banking-related activities, such as various types of loans, account opening, fixed deposits, and money transactions.

The merger was driven by the need to compete with public sector banks and fintech companies. The management believes that the merged entity will have a larger balance sheet, enhancing its competitiveness.

From HDFC Limited's perspective, this merger can be more profitable as its business is less profitable compared to HDFC Bank. For HDFC Bank, the merger will help strengthen its loan portfolio and allow it to offer its products to a larger customer base.

HDFC Limited Chairman Deepak Parekh described the merger as a merger of equals. He expressed optimism about the housing finance business, citing factors such as the implementation of the Real Estate Regulation Act (RERA), infrastructure status for the housing sector, government initiatives on affordable housing, and improved regulations in the banking and non-banking financial company (NBFC) sectors.

Overall, the merger of HDFC and HDFC Bank marks a significant milestone in the Indian financial sector, creating a powerful financial institution capable of offering a wider range of services to customers.