The HDFC duo have received the green signal from the stock exchanges for their mega merger. Both the entities said in separate regulatory filings that they have received “observation letters” from the BSE and the NSE on Saturday.
The letter contained “no adverse observations” from the BSE and “no objection” from the NSE.
The companies still have to get approval from the Reserve Bank of India, Securities and Exchange Board of India, the Insurance Regulatory and Development Authority of India (Irdai), Competition Commission of India and the National Company Law Tribunal (NCLT).
The boards of HDFC and HDFC Bank on April 4 approved a scheme of amalgamation, subject to requisite approvals. The reverse merger will be a two-part process in which HDFC Investments Ltd and HDFC Holdings two arms of the corporation will merge with HDFC.
Subsequently, HDFC will be merged with HDFC Bank. While the merger is to be completed by the second or third quarter of 2023-24, every HDFC shareholder will get 42 shares of HDFC Bank for 25 shares held.
Addressing the shareholders of HDFC at its 45th annual general meeting (AGM) last week, chairman Deepak Parekh said that the companies have made applications to various authorities such as the RBI, Sebi, Irdai, stock exchanges and the CCI, which are presently under consideration by the respective authorities and that there is a sequence of approvals required prior to the NCLT convening a meeting of shareholders for approving the merger.
Parekh had also pointed out that till the effective date of the merger, the corporation would continue to carry on business in the normal course as an NBFC-Housing Finance Company. After the proposed merger, HDFC Bank will be owned 100 per cent by public shareholders and existing shareholders of HDFC will own 41 per cent of the lender.
HDFC and its two arms at present hold around 25.78 per cent in the bank and the public holds the rest. This HDFC stake will be extinguished after the amalgamation. While the companies may have got the go-ahead from the stock exchanges for the merger, all eyes are on the RBI.
HDFC Bank has requested the regulator for a phased approach to meet requirements such as cash reserve ratio, statutory liquidity ratio and priority sector lending (PSL) as meeting all these requirements will be challenging.