Merger & Acquisition of HDFC Bank with Centurian Bank of Punjab


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The slides show the details of the largest merger in Indian banking sector between HDFC Bank and CBoP.
The benifits and the side effects of the merger are also highlighted in the following presentation

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Merger & Acquisition of HDFC Bank with Centurian Bank of Punjab

  1. 1. Merger & Acquisition Group Members: Pooja Chopade 1268 Kalyani Mudliar 1289 Rohan Solanki 1310
  2. 2. HDFC Bank Centurion Bank of Punjab  Incorporated in 1994  Incorporated in 1994  It was set up by the blue-blooded Housing Development Finance Corporation (HDFC), India's most reputed mortgage-finance company.  Joint Ventures with Century Finance and Keppel Group  HDFCs Strategies include :  Increase market share in India  Maintain Low costs  Strong Asset quality  Disciplined Risk Management  High earnings in the low volatile range.  Bank of Punjab Merged with Centurion Bank to form Centurion Bank of Punjab
  3. 3. Merger between HDFC Bank & Centurion Bank of Punjab (CBoP) Merger Date : Feburay 25th 2008 Value of the Merger : $ 2.5 billion  HDFC Bank was one of the first private-sector banks to get off the ground when Indian regulators began giving out new private-sector banking licences in the early 1990s.  Meanwhile, CBoP, a floundering new-generation private bank, was taken over in 2003 by a group of investors spearheaded by Sabre Capital, a fund started by Mr Talwar, a former Standard Chartered Bank chairman.  CBoP share holders would get one share of HDFC for 29 shares of CBoP.
  4. 4. Nature of the Merger  Horizontal Merger  Objectives :  Economies of Scale  Wide Line of Products  Dominance in the competitive Banking Industry in India  The merger was important to face competition from foreign banks looking to enter the Indian Banking front.  Both banks had a strong foothold in various sectors like SME & retail Segments and Retail deposit franchise, vehicle financing, etc.
  5. 5. Benefits of the Merger  Regional strength is one of the benefits that HDFC Bank was looking for, but the merger will also offer several others.  Organic growth with a merger that would add scale, geographical reach and experienced staff, which are in short supply.  HDFC Bank has 23,000 employees while CBoP has about 7,500.  The deal will add 394 branches and 452 ATMs to HDFC Bank's existing 754 branches and 1,906 ATMs  The new entity will have assets of about Rs1.5trillion, the merged entity will also have a deposit base of around Rs1.2trillion and net advances of around Rs850bn.
  6. 6. Side effects of the Merger  On the day the swap ratio was announced, CBoP shares, which had run up in anticipation, fell 14.5% to Rs48.25 per share in adjustment to the ratio.  HDFC Bank shares fell 3.5% to close at Rs1,422.70 a share, reflecting investor concerns that CBoP's valuation was too high.  CBoP's asset quality and resource profile, though healthy, are slightly weaker than HDFC Bank's own and could impact HDFC Bank adversely in the short term.  According to rating agency CRISIL, the benefits of an expanded branch network and wider geographical coverage will more than offset any short-term negatives.  Other Road blocks :  Technological Aspects  HR Mapping  Operational Issues
  7. 7. Combined Entity…
  8. 8. Strategic Impact of the Merger  Increased presence in Metros  7th largest banl with assets woth Rs. 1097 billion  Rise by :  Net Profit 44.6%  Interest Income 74.9%  Advances and Deposits grew by 60.4% Gain to Shareholders
  9. 9. Thank You…