HDFC Bank on Monday announced a share swap ratio of 1:29 for the merger of Centurion Bank of Punjab (CBoP) with itself.

In effect, stake holders of Centurion Bank will get one equity share of Rs 10 each of HDFC Bank for their 29 equity shares of Re 1 each of CBoP held by them. 

The share swap ratio, which is subject to due diligence to be conducted in this regard, was based on the joint valuation report submitted by Ernst & Young and Dalal & Shah.

Addressing a press conference here, Mr Deepak Parekh, Chairman, HDFC said, “The merger is a “win-win” for stakeholders of both banks.”  

The Board of HDFC Bank, Mr Parekh continued, observed that in the event of the merger being approved at its meeting to be held on February 28, 2008, it would consider making a preferential offer to its promoter, Housing Development Finance Corporation (HDFC), to enable HDFC maintain its existing shareholding in the bank at 23.2 per cent. “We would need about Rs 3,900 crore to maintain our stake in HDFC Bank at 23.2 per cent,” HDFC Ltd Chairman Deepak Parekh said. The housing lender will decide on raising the funds shortly, he added.

Mr Parekh also stated that Mr Shailendra Bhandari, CEO, Centurion Bank of Punjab, will now be executive director of HDFC Bank, while Mr Rana Kapoor, a shareholder in Centurion Bank of Punjab, has been invited to join the board of HDFC Bank.

Combined entity

Mr Aditya Puri, Managing Director, HDFC Bank said the merger is based on four premises - people, products, distribution and growth. “This is a merger that is fair, professional and clean,” he said. After the completion of merger, the combined entity would have a nationwide network of 1,148 branches (the largest amongst private sector banks), a deposit base of around Rs 1,20,000 crore and and net advances of around Rs 85,000 crore. The balance sheet size of the combined entity would be over Rs 1,50,000 crore.

“We have no integration and people issues...the overlap of branches of both banks is almost none,” Puri said clarifying that there would be no downsizing.

He added,“We expect to complete the complete merger within four months of our general body meeting in March.”