Bandhan Bank, HDFC-led Gruh Finance set to merge

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Mumbai, Jan 7: Bandhan Bank and HDFC-controlled Gruh Finance, an affordable home loans subsidiary, are set to unveil a $12-billion share-swap merger. A formal announcement could come this week—as early as Monday evening or Tuesday. Investment bankers were roped in to formalize the deal-making negotiated directly between the dominant shareholders of the two entities.
The merger would result in Bandhan founder Chandra Shekhar Ghosh bringing down his promoter holding to just above 60%. HDFC, which owns 58% in Gruh, may end up with over 10% stake in the combined entity, which it plans to cut further through stock exchange off-loading before the merger gets regulatory approvals, people directly aware of the matter said.
When contacted, Bandhan Bank declined to comment on the report. HDFC did not respond to emails and calls over the weekend. A business television channel had reported on the deal talks last month.
The merger creates a combine with market value totaling over Rs 88,000 crore ($12 billion). Bandhan shares were beaten down following the RBI strictures for not bringing down promoter holding to 40% from the current 82% by August last year. The curbs included a freeze on the chief executive’s remuneration and restrictions on opening of new branches. Bandhan shares ended at Rs 529 apiece down 1% in Mumbai trade on Friday. It had an all-time high market value of Rs 702 apiece last August. The deal process kicked off when Kolkata-based Bandhan Bank approached the HDFC top brass exploring a merger with Gruh Finance. This set in motion direct talks between HDFC chairman Deepak Parekh and Bandhan’s Ghosh.