HDFC Bank, India's largest private sector lender, has announced its decision to merge with HDFC, the country's first retail housing finance company, making it a behemoth and also unlocking consumer potential with cross-selling opportunities
Headquarters of India's HDFC bank is pictured in Mumbai, India
Image: Shailesh Andrade/ Reuters
Quite often, turning 65 means hanging up one’s boots. But here have been some notable exceptions, too. Captain CP Krishnan Nair set up the first Leela Hotel in 1987 when he was 65 and built it into one of India’s best-known luxury hotel chains. Ashok Soota, the technology veteran, started Happiest minds in 2011 when he was 68, and is today among India’s richest people with a net worth of $1.2 billion. Although not quite 65, Falguni Nayar founded Nykaa at 49 and turned it into a beauty and fashion behemoth by the time she is nearly 60.
But long before they all did that, and inspired many others, it was perhaps Hasmukh Thakordas Parekh, who disregarded conventional norms of his time to start a venture that has now gone on to rewrite corporate India’s annals. HT Parekh founded Housing Development Finance Corporation Limited (HDFC), India’s first retail housing finance company, soon after he had retired as the chairman of Industrial Credit and Investment Corporation of India (ICICI) at the age of 65.
“At that time, it was akin to a startup,” Deepak Parekh, his nephew and chairman of HDFC wrote in the book, India Transformed, published by Penguin Books. “The only difference was that, unlike most startups, which are largely set up by young entrepreneurs, this one was a post-retirement venture by the founder, HT Parekh.”
On April 4, 45 years since that ambitious leap of faith, HDFC announced that it will merge with the country’s largest private lender, HDFC Bank, to create a banking behemoth that will also become the country’s second-largest company. In sheer size, it will be twice as big as ICICI Bank, India’s third-largest bank. Soon after the announcement, the market capitalisation of both the companies zoomed to over Rs 14 lakh crore, about Rs 4 lakh crore less than that of India’s largest company, Reliance Industries Limited.
HDFC, set up in 1977, issues mortgages to more than half of the home buyers in India. HDFC Bank, which began operations in 1994 as a subsidiary of HDFC, is currently India’s second-largest bank. Post the merger, HDFC will hold 41 percent of HDFC Bank Ltd. Its shareholders will get 42 shares of HDFC Bank for every 25 shares of the non-banking financial company (NBFC) held by them. The deal, which has pending regulatory approvals, is likely to be completed over the next 12 to 18 months until which both institutions will continue to function as independent entities.