Bandhan Bank announces Gruh merger

BANDHAN BANK SAID THE SHARE EXCHANGE RATIO WILL BE 568 SHARES OF BANDHAN BANK FOR EVERY 1,000 SHARES OF GRUH

MUMBAI: Private sector lender Bandhan Bank Ltd on Monday announced the acquisition of Gruh Finance Ltd through a share swap scheme, creating a lender that would have a market value of around ₹83,000 crore.

In a filing made to stock exchanges after the boards of both lenders met, Bandhan Bank said the share exchange ratio will be 568 shares of Bandhan Bank for every 1,000 shares of Gruh Finance, which is controlled by Housing Development Finance Corp. Ltd.

This essentially means the swap ratio is close to 0.6 or 3:5 between Bandhan Bank and Gruh Finance. The merger will be effective January 1, 2019.

Anup Kumar Sinha will be appointed as part-time chairman after the merger, Bandhan Bank said.

The swap ratio implies that the pricing for the merger is in line with the six-month weighted average price of the two companies.

Shares of Bandhan Bank fell 5.21% to close at ₹501.10 on the BSE in a positive market.

The bank’s market capitalization now stands at around ₹60,000 crore, while Gruh Finance has a market valuation of around ₹22,436 crore. At these valuations, the combined entity will have a total market cap of around ₹83,000 crore. The six-month weighted average prices of Bandhan Bank and Gruh Finance are at ₹552.64 and ₹318.50, respectively on BSE.

HDFC holds 57.83% or 423.8 million shares in Gruh Finance as the promoter, while Bandhan Financial holds around 82.28% or 981.4 million shares in Bandhan Bank.

However, since the merger is being carried out on the basis of six-month weighted average prices cited above, the merger will result in HDFC’S holding falling to around 15.44% in the holding company and Bandhan Financial’s holding coming down to around 60.27%. This final shareholding structure was formally confirmed by the bank on Monday evening.

“This is a semi-arranged match. Ghosh approached me initially with this idea. But one has to leave it to the bride and groom to figure it out about compatibility,” said Deepak Parekh, chairman of HDFC at a press conference.

Chandra Shekhar Ghosh said the merger will help balance Bandhan Bank’s portfolio.

“If RBI doesn’t approve, then we will have to request RBI to allow us permission to hold 9.9% stake. This is a financial investment for HDFC,” said Parekh.