Once merged, HDFC twins to pop into global club of 100 most valued firms led by Apple

The combined enity arising out of the HDFC Bank-HDFC merger will feature among the world's 100 most valued firms in terms of market capitalisation, according to Bloomberg data.

The entity will carry a $190 billion tag. Shares of HDFC soared as much as 20% after the merger announcement while HDFC Bank jumped 14%. HDFC has Rs 6.23 trillion in assets and Rs 4.82 trillion market cap. HDFC Bank has Rs 19.38 trillion in assets and a market cap of around Rs 9.08 trillion.

The combined entity will be 63rd most valued firm globally. Currently, Apple is the world's most valued firm with a market cap of $2.84 trillion followed by Microsoft ($2.32 trillion) and Saudi Arabian Oil Co, also known as Saudi Aramco ($2.3 trillion).

Among lenders it will become the fifth most valuable in the world. Currently, JP Morgan Chase is the world's most valued lender with market cap of $400 billion followed by Bank of America ($330 billion), Industrial and Commercial Bank of China ($257 billion) and China Construction Bank Corp ($192 billion).

“The mega-merger will enable value unlocking for HDFC bank to build a solid housing loan portfolio and play the housing cycle by enhancing the existing customer base. The merged entity could become the highest weightage single company in the Nifty 50 basket. Further, this merger enables confidence in the Indian economy and looks for a brighter long-term picture beyond the ongoing Russia-Ukraine conflict and rising inflationary concerns,'' said Naveen Kulkarni, Chief Investment Officer, Axis Securities.

Both the firms announced in a notice to exchanges that the merger would be through a share swap and once the deal is effective, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of the bank.

Every HDFC shareholder will get 42 shares of HDFC Bank for 25 shares held. The merger is expected to be completed by the second or third quarter of fiscal year 2024.

The merger follows a proposal by the Reserve Bank of India for large non-banking finance companies to convert into banks after India was shaken by a massive shadow lending crisis in 2018.