Aim to double every four years: HDFC Bank MD after merger

Having successfully executed the merger with parent HDFC, HDFC Bank’s managing director and chief executive Sashidhar Jagdishan on Saturday said the country’s largest lender aims to double every four years. In a letter to the over 4,000 employees from HDFC who joined the bank’s rolls on Saturday, Jagdishan said the future is bright, and the work on realising the potential of the merger starts now.

“The runway for financial services and mortgage, which are so underserved and under penetrated, is going to be very large. HDFC Bank – the combined entity – with a large and growing distribution and customer franchise, more than adequate capital, healthy asset quality and profitability, will be best positioned to capture growth. The pace at which we aim to grow – we could be creating a new HDFC Bank every 4 years,” he said.

HDFC Bank began the day one after the merger with a rebranding exercise, wherein it is putting up its colours at all the over 500 branches and offices of HDFC Ltd. The erstwhile HDFC’s corporate headquarters at Ramon House already sports the HDFC Bank branding, and officials estimated that the entire exercise will be over in the next 24 hours.

It can be noted that dedicated teams have been put in place to make the merger as seamless as possible, right since its announcement on April 4 last year. As part of the USD 40 billion all-share deal, the biggest in Indian corporate history, HDFC Bank had committed to absorb all the over 4,000 employees of its parent.

“Our work starts from today, in realising the potential of what this merger holds for us,” Jagdishan wrote. To realise its growth aims, Jagdishan said the bank will be adding about 1,500 branches every year for some years to better serve the middle class and upper segment of the country.

It will continue investments on the digital front as well which, Jagdishan said, will make HDFC Bank into a ‘technology company into banking”, and added that the same will get unveiled over the next three years. The bank will be assessing its people on the basis of how they conduct governance and compliance, teamwork and their ability to delight customers, he said.

The canvas being offered to the HDFC Ltd employees is large — both professionally and personally, the email said, adding that an external expert was appointed to arrive at the right formula for inducting people into the bank and deciding their role in the hierarchy. Jagdishan said the cost-to-revenue ratio of HDFC at 0.04 per cent was the lowest for any mortgage company in the world, and thanked its leadership, including Deepak Parekh, Keki Mistry and Renu Karnad, for creating such an institution.

He said from a customer perspective, the home loan is a very emotional product which establishes a great bond between the financier and borrower and added that HDFC Bank would like to harness the same bond. “The penetration levels of the home loan product in its (HDFC Bank’s) customer base and the extent the distribution has been leveraged, is quite low. This is an opportunity! The runway for growth is going to be large and for a long time to come,” Jagdishan said.

HDFC Bank will move from sales management to a relationship management model because of the opportunity to cross-sell that exists within the franchise after the addition of mortgage finance, insurance and asset management subsidiaries, Jagdishan said. “The velocity of product sales and the reduced touch points to serve the customer will be a game changer with this ‘power of bundling’,” he added.

HDFC Ltd, the parent of the country’s largest private sector lender, merged into HDFC Bank on Saturday, with boards of both entities clearing the plan first presented on April 4 last year. HDFC Ltd, the largest pure-play home financier, ceases to exist 44 years after it was founded.

The USD 40-billion merger, the largest such deal in Indian corporate history, is driven by a changing regulatory landscape, which limited the advantages for HDFC continuing as a non-bank lending entity. Post-merger, HDFC Bank will become the fourth most valued lender in the world, and narrow the gap by asset size with state-owned SBI to be the second largest Indian bank.

The total business of the merged entity stood at Rs 41 lakh crore at the end of March 2023. With the merger, the networth of the entity would be over Rs 4.14 lakh crore. The combined profit of both entities was to the tune of about Rs 60,000 crore at the end of March 2023.

With the deal getting effective, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC will own 41 per cent of the bank. Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares they hold.

The board of directors of HDFC Bank in consultation with the board of directors of HDFC Limited has fixed July 13, 2023, for determining the shareholders of HDFC Ltd who would be issued and allotted the shares of HDFC Bank, it added.

Besides, July 13 has been fixed for the continuation of warrants of HDFC Limited in the name of HDFC Bank. The board has fixed July 12, 2023, for the transfer of non-convertible debentures while July 7 for the transfer of commercial papers of HDFC Ltd in the name of HDFC Bank.

The merged entity brings together significant complementarities that exist between both entities and is poised to create meaningful value for various stakeholders, including respective customers, employees and shareholders of both entities from increased scale, comprehensive product offering, balance sheet resiliency and ability to drive synergies across revenue opportunities, operating efficiencies and underwriting efficiencies, a statement said.

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