HDFC Bank to consider IPOs for HDFC Sec, HDB Financial Services after merger

HDFC Bank will only consider a public listing of its brokerage and non-bank finance company subsidiaries after the completion of its merger with parent HDFC Ltd, CEO and managing director Sashidhar Jagdishan stated on July 16. The $40 billion merger between HDFC Bank and HDFC, billed as the largest deal in corporate history, was announced in April. It is expected to take up to 18 months to complete.

In response to questions from shareholders at the 28th annual general meeting of the largest private sector lender, Jagdishan stated that the merger process will determine whether or not HDFC Securities and HDB Financial Services will make their initial public offerings (IPOs).

"The IPO plans (of HDFC Securities and HDB Financial Services) are something that we will contemplate after we have absorbed (the merger)… we've got directions from the regulator, after we absorb as and when the merger happens. And then we will think about it,” Jagdishan said.

He had earlier stated that with regard to HDB Financial Services, the bank is still awaiting instructions from the regulator in order to determine a "glide path" for the company's future. HDB Financial Services recently reported a significant increase in post-tax net at ₹441.3 crore for the June quarter.

Given the complementarity in business offers with the brokerage whose clients are the same as the bank's, the bank would like to keep a majority interest in HDFC Securities, according to the CEO. The choice of maintaining the stake at the existing 95 percent or reducing it will be made in due course, according to Jagdishan.

The bank has postponed its plans to increase its investment in HDFC Ergo General Insurance despite receiving approval from the RBI, pending the merger with HDFC, after which the insurer will become a subsidiary of the bank itself, according to Jagdishan.

Jagdishan explained that because mortgage assets are typically longer-term in nature, the bank's asset liability committee will need to make the appropriate decisions. Once the merger is complete, the bank will also need to consider raising the maturity profile of its liabilities, which are currently below three years.

The HDFC Bank CEO stated that the combined entity's overall composition of housing loans will be 35% and hinted at offering more of the same product by saying that it does not view this as a concentration concern. He emphasised that while the under-penetration gives an opportunity on the one hand, the bank's other loan products would also be expanding on the other.

After the merger, the bank wants to "patronise" HDFC's deposit agents, but he said it will wait for regulatory clarification before doing so.

The bank, which has recently been criticised by the regulator due to client interruptions, plans to develop Payzapp, a payments app that will be superior to its existing offering and include features like rapid credit of cashbacks, in the near future. said Jagdishan.

He said from July or August onward, it plans to launch one new digital offering every three to four weeks, which will also include a new mobile app for corporate and small business clients, and added that it has already soft-launched a customer experience hub without much fanfare.

Meanwhile, the bank's non-executive chairman Atanu Chakraborty said it was looking at doubling its branch network to over 12,000 over the next 3-5 years, and the sizes of branches may reduce over time.

Typically, it takes two years for a branch in a metro city to break even, while the same for other pockets is around three years, he said.

(With PTI inputs)