HDFC Bank Can Launch Two New IPO For These Subsidiaries Once Merger With HDFC Is Completed

Sashidhar Jagdishan, CEO & MD, HDFC Bank said on July 16 that only after the merger with parent HDFC Ltd, will HDFC Bank consider the public listing of its brokerage and non-bank finance company subsidiaries.  

Announced in April, the $40 billion merger between HDFC Bank and HDFC is billed as the largest deal in corporate history. This is believed to take a period of 18 months to complete.

The IPO to Contemplated Only After The Merger

During the 28th annual general meeting of the largest private sector lender, the CEO said that whether or not the HDFC Securities and HDB Financial Services will make their initial public offerings (IPOs) is totally dependent on the merger process.

He said that after the merger is done and have clear directions from the regulator, they will contemplate about the IPO.

The company is waiting for the instructions from the regulator to determine a “glide path” for the future of HDB Financial Services, which currently reported a significant increase in post-tax net at ?441.3 crore for the June quarter.

As per the CEO, the bank would like to keep a majority interest in HDFC Securities, as the brokerage is complementarity to the bank’s business.

CEO said what is to be decided is the fact that the stake is to be kept at existing 95 percent or to be reduced.

Despite getting the green light from RBI, the bank has postponed its plans to increase its investment in HDFC Ergo General Insurance. This is because after the merger with HDFC, the insurer will become a subsidiary of the bank itself.

As per Jagdishan, the bank’s asset liability committee will need to make the appropriate decisions as the mortgage assets are typically longer-term in nature. The will also need to consider raising the maturity profile of its liabilities, which are currently below three years after the completion of the merger. 

The combined entity’s overall composition of housing loans will be 35%, he emphasized that though the under-penetration of the same gives an opportunity on the one hand, but the bank’s other loan products would also be expanding on the other.

CEO said that after the merger, the banks wants to “patronise” HDFC’s deposit agents but is waiting for the regulatory clarification.

Jagdishan said post the criticism by the the regulator due to client interruptions, the bank plans to develop Payzapp, a payments app that will be superior to its existing offering and include features like rapid credit of cashbacks.

Every three to four weeks post July or August onward, the bank plans to launch one new digital offering. This shall include a new mobile app for corporate and small business clients. 

Expanding the Branch Network

On the other hand, Atanu Chakraborty, bank’s non-executive chairman said that the company plans to double the branch network to over 12,000 over the next 3-5 years. He said that the sizes of branches may reduce over time.

He added that generally a branch started in a metro city, takes a period of 2 years to break even. The period is three years for the branches in other locations.

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