Bandhan Bank may acquire HDFC-led Gruh Finance in share swap deal

Shareholders of Gruh Finance will receive three shares of Bandhan Bank for every five shares they hold in the affordable home loans subsidiary.

Bandhan Bank is set to acquire Gruh Finance, the affordable home loan subsidiary of Housing Development Finance Corporation (HDFC), via a $12 billion share swap, media reports suggest.

A formal announcement on the same could come as early as today evening or January 8, as per a report from The Times of India.

Sources quoted in a report by Mint said that the move is aimed at paring down Bandhan Bank’s founder and CEO Shekhar G's holding to 60.27 percent in line with the regulator’s banking licence rules and expanding its housing finance portfolio.

The rules require Bandhan Financial Holdings to halve its stake to 40 percent from 82.3 percent within three years of starting business. In September 2018, it had placed restrictions on the bank for failing to meet these rules by freezing branch expansion and Ghosh’s remuneration.

The report by Mint also says that shareholders of Gruh, in which HDFC holds 57.83 percent stake, will receive three shares of Bandhan Bank for every five shares held.

Reportedly HDFC may end up with 15.44 percent stake in the combined entity. The housing finance major may pare it down further by around 5.5 percent via share sale to a clutch of public institutional investors or in the secondary market before the merger gets regulatory approval.

This is to ensure it doesn’t fall out of line with RBI’s bank ownership norms, which does not allow the promoter of one bank to hold more than 10 percent in another bank as a promoter.

If the merger goes through, it will create a combined entity with a market value of over Rs 88,000 crore ($12 billion).

Moneycontrol couldn’t independently verify the reports.

As per the TOI report, the deal process kicked off when Kolkata-based Bandhan Bank approached HDFC top brass exploring a merger with Gruh, adding that 10 days back, investment banks JM Financial and Arpwood were roped in to formalise the details and give their opinion on valuations.

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