Manoj Vaibhav Gems ‘N’ Jewellers Limited IPO – Price, Lot size, Open date, GMP & Review
Monday, June 24, 2024
HDFC Bank & HDFC Merger – Key Points to Know
HDFC Bank & HDFC Merger – Key Points to Know
HDFC merged with HDFC Bank effective from July 1, 2023. This merger of India’s largest housing finance company with the country’s largest private sector bank has created the third-largest entity in India, in terms of market capitalization. This $40 billion all-stock merger resulted in the creation of the fourth-largest bank in the world after JPMorgan Chase, the Industrial and Commercial Bank of China and Bank of America.
Read on to find out everything you need to know about HDFC-HDFC bank merger.
Key points on HDFC and HDFC Bank merger
Here are some of the important details that you need to know about the merger between HDFC and HDFC Bank:
- Current size – HDFC Bank boasts of more than 6,300 branches across the country catering to nearly 3,000 cities and towns. More than half of the bank’s branches are strategically located in semi-urban and rural areas. This will benefit the merged entity through product offerings surrounding affordable housing.
- Deal size – The merger has resulted in a combined balance sheet of nearly Rs. 17.87 lakh crores. Post the merger, the combined entity’s net worth is estimated to be Rs. 3.3 lakh crores, thus making HDFC Bank nearly double the size of ICICI Bank. The merger will also enable the merged entity to carry out underwriting at a substantially larger scale.
- Opportunities – 70% of HDFC customers were not associated with HDFC Bank. With this merger, the bank will gain from significant cross-selling opportunities.
- Competition – This merger will place the combined entity in a very strong place to be capable of countering competition and will further make the mortgage business more competitive.
- Mortgage scale – HDFC Bank’s mortgages saw a CAGR of 24.5% standing at Rs. 702.2 billion in 2021. The merger will now result in the firm’s loan book having large contributions from mortgages as these will account for nearly 33% considering the segment is rapidly growing.
- Management – The merged entity will be led by HDFC Bank’s CEO Sashidhar Jagdishan.
The loan accounts of HDFC customers will be transferred to HDFC Bank post the effective date of merger. However, HDFC portal and mobile application would continue to work as usual.
So, if you are a HDFC customer, your loan account number, terms of loan agreement and login credentials will remain unchanged. The merger will also not have any impact on interest rates and repayment cycle of the loan. This means the EMI will remain the same.
How did HDFC and HDFC Bank customers benefit from the merger?
The HDFC and HDFC Bank merger is being described as a coming together of equals. The customers of both organizations will therefore be the biggest beneficiaries. The merged entity will benefit from the synergies of these two organizations. For instance, the mortgage business will have access to low-cost bank funds. This will ensure that HDFC continues to remain competent in the mortgage lending business.
With this merger, HDFC’s shareholders will get HDFC Bank’s 42 shares for every 25 shares of HDFC. While existing shareholders of HDFC will have 41% ownership of HDFC Bank, HDFC Bank will become an entirely publicly owned bank.
What do investors need to know about the HDFC-HDFC Bank merger
Here is what investors of both HDFC and HDFC Bank need to be aware of:
- The stock holdings of HDFC Ltd in HDFC Bank will be extinguished as per the merger agreement.
- HDFC Bank will be an entirely publicly owned company post the merger.
- All of HDFC’s subsidiaries, including HDFC Life Insurance and HDFC Asset Management Company, would be subsidiaries of HDFC Bank.
The bank won the 2021 award for the World’s Best Bank published by Forbes jointly with the market research firm Statista.
Strategic benefits of the merger
The Indian economic environment does not offer significant incentives to standalone NBFCs. Since the RBI has also been tightening rules around these, many top NBFCs find it tough to comply with the regulations. Since these norms are very similar to those applicable to banks, it makes sense for the housing finance company to merge with its large-sized banking arm.
The merger between HDFC and HDFC Bank is seen as a strategic move that will also have certain regulatory advantages for both companies. Regulations surrounding banks and NBFCs (Non-Banking Financial Company) have been harmonised in the past few years, enabling easy merger decisions.
The merger decision is also based on the idea that the combined entity will gain a strategic advantage to attain faster and easier growth.
Conclusion
In conclusion, the merger between HDFC and HDFC Bank was estimated to bring substantial benefits. The new entity now has the capacity to underwrite larger ticket loans, including infrastructure loans, thereby boosting credit flow in the economy. It also aims to enhance home loan offerings to a broad customer base and accelerate the pace of credit growth. The merger has marked the beginning of a new chapter in HDFC Bank’s history, promising improved services for low- and middle-income groups and potential for significant economic impact. However, the long-term success of this merger in delivering on its promises remains to be seen, making it a pivotal moment in India’s corporate landscape.
FAQs
What is the post-merger shareholding structure of HDFC and HDFC Bank?
After the merger, HDFC Bank will be entirely publicly owned and existing shareholders of HDFC Ltd will get 41% of HDFC Bank’s ownership.
What is the structure of the merger transaction between HDFC and HDFC Bank?
The merger transaction of HDFC and HDFC Bank involves the amalgamation of HDFC’s two wholly owned subsidiaries namely, HDFC Holdings and HDFC Investments with HDFC Bank. HDFC Ltd. is a promoter of HDFC Bank and currently holds about 21% of the bank’s share capital. After the merger, all of HDFC Ltd’s subsidiaries and associate companies will be owned by HDFC Bank.
How will HDFC Ltd benefit from the merger with HDFC Bank?
While NBFCs tend to raise capital at a much higher cost, traditional banks can access low-cost capital that comes in the form of savings and current account deposits. With this merger, HDFC Ltd will gain access to HDFC Bank’s low-cost deposits. HDFC Ltd can leverage HDFC Bank’s CASA ratio of more than 47.1%.
How will HDFC Bank benefit from the merger with HDFC Ltd?
By merging with HDFC Ltd, HDFC Bank can quickly build its housing loan portfolio by offering mortgages to customers through its core products. Currently, the bank has 11% exposure to mortgages whereas post-merger, the company will have 33% exposure, resulting in a 200% rise.
Top traded stocks by volume on NSE in India
Top traded stocks by volume on NSE in India
One of the critical aspects to consider while trading is the volume of the stocks. Stocks that usually have a higher volume provide more liquidity and effective entry and exit trading strategies. But are you a new trader and do not know where to find them? Do not worry we have got you covered. Check out this blog to find the list of the most active stocks on the NSE in terms of traded volume. Also, learn the meaning of traded volume and its importance in stock trading.
Read More: How to use volume in trading?
Which are the top traded stocks by volume on NSE?
The list of top-traded stocks by volume on the NSE is quite dynamic. The current list of such stocks as of September 7th 2023 is given below.
Most Active stocks on NSE – NIfty 50 for the past 1 month period and volume traded
| Stock name | Volume traded in 1 month period |
| State Bank of India | 3,27,36,325 |
| Tata Steel Limited | 2,07,11,952 |
| ICICI Bank Limited | 1,66,86,062 |
| HDFC Bank Limited | 1,41,50,459 |
| NTPC Limited | 1,29,29,354 |
| Axis Bank Limited | 1,09,22,609 |
| Tata Motors Limited | 98,93,466 |
| Mahindra and Mahindra Limited | 92,57,291 |
| ITC Limited | 91,61,131 |
| Coal India Limited | 67,44,074 |
What is traded volume?
Traded volume, in the context of financial markets, represents the total number of shares, contracts, or units of a financial asset that change hands during a specific time frame, such as a trading day. It serves as a vital indicator of market activity and liquidity. High trading volume suggests an active market with many participants, making it easier to buy or sell assets at prevailing prices. Conversely, low trading volume may indicate a less active market, potentially leading to wider bid-ask spreads and challenges in executing large transactions.
Why is volume significant in trading?
The concept of volume is one of the most critical concepts in stock trading. The significance of volume in stock trading is highlighted in the points hereunder.
Liquidity assessment
In the world of stock trading, liquidity is a crucial factor. It represents how easily you can buy or sell a particular stock without significantly impacting its price. The volume provides a key indicator of the liquidity of stocks. Stocks with high trading volumes typically have tighter bid-ask spreads, meaning you can buy and sell them at prices closer to the market rates. On the other hand, low-volume stocks can be illiquid, making it more challenging to execute trades without affecting the stock’s price. Liquidity is essential because it ensures you can enter or exit positions efficiently, which is particularly important for day traders and short-term investors.
Identifying trends
Volume plays a pivotal role in identifying trends in the stock market. When a stock is experiencing an uptrend, it often accompanies a significant increase in trading volume as more buyers enter the market. Conversely, in a downtrend, higher volumes tend to coincide with increased selling pressure. By analyzing volume along with price movements, traders can confirm the strength and sustainability of a trend. A strong trend with high volume provides more confidence to traders compared to a weak trend with low volume.
Understanding market sentiment
The volume also reflects market sentiment in general. For example, a sudden surge in trading volume can indicate heightened interest or excitement about a particular stock or the overall market. This may be due to significant news, earnings reports, or market events. Understanding the sentiment behind volume can help traders anticipate market moves and react accordingly. A high volume on positive news might indicate bullish sentiment, while a high volume on negative news could suggest bearish sentiment.
Price confirmation
Volume can confirm price movements for traders and help them in making suitable trading decisions. When the price of a stock rises or falls accompanied by high volume, it suggests that the price move is more likely to be sustained. This confirmation provides traders with confidence in their trading decisions. Conversely, when price movements occur on low volume, they are often considered less reliable, as they may be driven by a smaller number of participants and lack the broad support required for a sustainable trend.
Identifying support and resistance levels
Volume plays a pivotal role in trading by aiding traders in identifying significant support and resistance levels, confirming their validity, and anticipating potential breakouts or breakdown. When a price level has historically experienced high trading volume, it becomes a focal point for market participants, signifying strong support or resistance.
Additionally, surging volume during attempts to breach these levels can provide confirmation of their significance and offer cues for potential breakouts or breakdowns. Traders often use volume to strategically place stop-loss orders, safeguarding against unfavourable price movements. In intraday trading, volume analysis helps identify short-term support and resistance zones, facilitating quick decision-making for day traders
Conclusion
One of the primary requirements of a successful portfolio is understanding the price and volume dynamics. Traders need to keep a close track of the stocks that are being traded actively on the stock exchange and are supported by sufficient volume. The list of top traded stocks by volume on NSE is available on the official website of NSE as well as broker websites. Traders can therefore have real-time information on the changing volume of these stocks. This helps them understand the bullish and bearish markets and accordingly shape their portfolio.