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Bandhan Bank, Gruh Finance boards approve marriage of convenience

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Bandhan Bank, Gruh Finance boards approve marriage of convenience

Consequently, the promoter stake in Bandhan Bank will drop to around 61 per cent from 82.28 per cent, and HDFC will own 14.96 per cent stake in Bandhan Bank.

Bandhan Bank

For representational purposes (File | Reuters)

By Express News Service

MUMBAI: Bandhan Bank, which was under pressure from the Reserve Bank of India to cut promoter stakes, has taken the merger route with Gruh Finance, an affordable housing lender from the HDFC stable. Boards of both entities on Monday approved the merger at a ratio of 568 shares of Bandhan Bank for every 1,000 shares of Gruh Finance. The merger will be effective from January 1.

Consequently, the promoter stake in Bandhan Bank will drop to around 61 per cent from 82.28 per cent, and HDFC will own 14.96 per cent stake in Bandhan Bank. Since RBI regulations do not allow any entity to own more than one bank, HDFC would have to, in due course, bring down its stake in Bandhan Bank.
HDFC chairman Deepak Parekh said the deal helps HDFC to avoid any conflict of interest as it wants to expand its lending in the affordable housing segment. While HDFC has traditionally been a big ticket lender, Gruh Finance was promoted to cater to the affordable housing segment. Parekh also said they will have to apply to RBI for permission or sell stake to bring it to 9.9 per cent. Even for 9.9 per cent, RBI permission is required as only up to 5 per cent is automatic. Stake in HDFC Bank is strategic, whereas Bandhan stake is an investment, he said.

HDFC vice-chairman & CEO Keki Mistry, meanwhile, said that at present, the company has 37 per cent of its loans, and 18 per cent in value, from loans to weaker sections. He added that this was a very good opportunity for Gruh Finance to grow. “Both have a good retail brand: Gruh is in affordable housing and Bandhan in micro finance,” said C S Ghosh, MD & CEO of Bandhan Bank. Bandhan turned from a microfinance firm to a bank three years ago.

“Fair value of Gruh Finance based on the swap ratio turns out to be Rs 285 per share, whereas today’s closing price was Rs 306 per share. Hence, we expect downward pressure on Gruh Finance in tomorrow’s trade,” said Edelweiss Research.

 

 

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