HDFC, Centurion swap at 1:29

In the largest ever private sector bank merger, shareholders of Centurion Bank of Punjab will get one share of HDFC Bank for every 29 held, reports MC Vaijayanthi.

In the largest ever private sector bank merger, shareholders of Centurion Bank of Punjab will get one share of HDFC Bank for every 29 held. The two bank boards approved the swap ration of 1:29 for the HDFC Bank, Centurion Bank merger on recommendations by Dalal & Shah, chartered accountants, and Ernst & Young, independent valuers to the transaction. The value of the all-share deal works to out to $ 2.38 billion (Rs 9,510 crore).

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“People, products, distribution and growth are what we should be concerned about," said Aditya Puri, managing director, HDFC Bank, explaining the rationale behind the merger and the valuation. HDFC Bank has been growing at 40 per cent in the first three quarters of the current financial year and to sustain the growth it needed a talent pool, Puri added. With the merger, HDFC Bank would add 2.5 million customers and 393 branches of Centurion Bank.

While the stock markets gave a thumbs down to the swap ratio, Rana Talwar, chairman of Centurion Bank, called the valuation fair. Share prices of Centurion Bank fell 14.45 per cent to Rs 48.25 from Friday's closing price of Rs 56.40. HDFC Bank dropped 3.54 per cent to close at Rs 1,422.70 after a volatile session in which it touched a low of Rs 1,397 and a high of Rs 1,524.

The stake of HDFC in HDFC Bank will drop to 19 per cent from the current 23.2 per cent after the merger. "It would require Rs 3,900 crore to maintain our stake in the bank," said Deepak Parekh, chairman HDFC.