The merger of HDFC (Housing Development Finance Corporation) and HDFC Bank will create India’s second largest entity by market value. At Rs12.3 trillion the new conglomerate will be less than only Reliance Industries. A few days after the announcement on account of fluctuations in their share prices, the market capitalization of the combined entity was estimated at Rs 14.04 trillion, according to Business Standard (BS).
"This is not a question of giving up the identity. HDFC was the holding company, and (HDFC Bank) was a separate entity. Time and again we have looked at the possibility of a merger,” noted HDFC vice chairman and chief executive officer Keki Mistry in an interview with BS of April 6, 2022 on the merger. Mistry gave his reasons for the announcement: "The combined entity will get the benefit of lower cost of funds.”
Reiterating that HDFC Bank will have an equal focus on affordable housing, the executive stated that the combined entity "can continue to source loans because it has a large distributor platform… The Bank will have access to HDFC’s (loan) processing strength.”
"The merger makes the combined entity strong enough not only to counter competition but to make the (housing) mortgage offering even more competitive,” noted The Mint on April 5, 2022, quoting HDFC chairman Deepak Parekh.
The BS reported that after the merger, HDFC Bank will be the sixth biggest lender globally
in terms of market capitalization. "The merged entity, however, would need to grow its business multi fold to acquire the size of China’s and USA’s top banks,” noted BS. The top lending bigwig is JP Morgan Chase and Company with a market capitalization of nearly USD 400 bn. The merged Indian entity will be worth USD 185 bn.