Will The HDFC Merger Live Up To Its Promise?

Making the mega merger work involves complex moves. Here's the inside story

- Shayan Ghosh & Satish John

The year was 1993. The management of mortgage lender Housing Development Finance Corp. Ltd (HDFC) had just received an approval to set up a bank and was in two minds about what to call the new entity. They thought about calling it First City Bank. And they thought about calling it Bank of Bombay. But eventually, after the man who was to head it put his foot down, they called it HDFC Bank. A bank by any other name, he pointed out, would never be just as neat.

In a sense, the hesitation about the name was understandable. HDFC, which was then about 16 years into the business, had a sizeable book of ₹2,562 crore and a solid reputation. The top brass was uncertain about how the new bank would perform and wanted to protect the HDFC brand. But CEO-designate Aditya Puri made it clear that nothing other than the name HDFC Bank would work.

Eventually chairman Deepak Parekh gave in. The rest is history. Today, the subsidiary has eclipsed the parent and is all set to absorb it. On 1 July, HDFC Bank will take over the housing finance company in one of the largest mergers and acquisitions (M&A) deals of all time.

The numbers reveal just how big a deal it is. HDFC Ltd had assets under management of ₹7.2 trillion as on 31 March, up 11% from the previous year. Its gross bad loan ratio stood at 1.18%, down from 1.91% in the fourth quarter of last year. HDFC Bank has a total loan book of ₹16.1 trillion, 17% higher than the previous year. Its gross bad loans were at 1.1% of total loans, down from 1.2% in 2021-22. As for the bottom line, HDFC Ltd recorded a profit of ₹16,239 crore in 2022-23, while HDFC Bank reported a profit of ₹44,110 crore the same year.