While the regulatory approvals for the merger of Housing Development Finance Corporation Ltd (HDFC) and HDFC Bank are awaited, HDFC Chairman Deepak Parekh on Tuesday said that the support and trust of the shareholders is needed “more than ever before”.
“My only ask of our stakeholders is for your patience as we navigate through the complexities of this transaction. More than ever before, we need your trust and support,” Parekh said in a letter to the shareholders of HDFC during its 45th Annual General Meeting.
Stressing that trust is the foundation of a successful merger, financial and human capital along with a proper communication strategy is critical, he said.
“Fortunately, between HDFC and HDFC Bank, there is a natural affinity…It remains our every endeavour to be available and accessible to all our stakeholders to assuage concerns in an open and transparent manner,” Parekh said.
The proposed merger is awaiting regulatory approval at this stage. Other than the Reserve Bank of India (RBI), the merger will have to be approved by Securities and Exchange Board of India, National Housing Board, Competition Commission of India (CCI), Insurance Regulatory and Development Authority of India (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA) and National Company Law Tribunal (NCLT).
“We remain respectful of all our regulators and are confident that the outcome will be judicious and fair at a systemic level,” Parekh said.
The merger will increase the lending capacity of the group and is also expected to lower costs.
“We have at length, already articulated the rationale for the proposed merger, which takes cognisance of the future growth potential of the country, the evolving macro environment and changes in the regulatory architecture,” he said.
HDFC Group in April had announced merger of HDFC into HDFC Bank, along with two other entities HDFC Investments Ltd and HDFC Holdings Ltd. As per the scheme, HDFC Investments and HDFC Holdings will be first merged into HDFC, following which a merger of HDFC will take place into HDFC Bank.
On growth in demand for home loans in the country, Parekh remains optimistic despite the recent global headwinds. Rising income levels, improved affordability and fiscal support augurs well for the demand for homes. Real estate sector in India is on an upcycle and developers are now financially stronger and more disciplined, he added.
Parekh estimates the home loan market in India at around $300 billion, which is likely to double in the next five years. Even if the demand for home loans doubles, the mortgage penetration will remain on the low at 13% of the gross domestic products (GDP) compared to 20 to 30% of other Asian economies.
“This implies that housing loans in India will have an exponential growth trajectory for decades to come,” he said.