India’s Bandhan Bank is reportedly set to acquire HDFC Bank’s home loan subsidiary Gruh Finance.
The transaction will be carried out through a $12bn share swap process, according to local media reports.
HDFC Bank, which owns 57.83% stake in the Gruh Finance, will receive three Bandhan Bank shares against five shares held in the home financier, people familiar with the matter told Livemint.com.
The deal is expected to be formally announced by the two companies later this week following board meetings.
Promoted by HDFC and AKFED in 1986, Gruh Finance commenced operations two years later in January 1988.
Currently, it boasts 195 branches across 11 states of India. As of 31 March 2018, the company’s cumulative home loan disbursement stood at INR 284.56bn ($4.08bn).
Gruh Finance acquisition: Background
The acquisition is aligned with Bandhan Bank’s strategy to reduce promoter stake in the company.
In October last year, the bank was prohibited by the central bank of the country from opening new branches after it failed to reduce its main shareholder’s stake to less than 40%.
However, the ban was lifted last month after the bank announced plans to reduce promoter holdings to meet RBI guidelines.
The Gruh Finance acquisition will reduce promoter holdings in Bandhan Bank from 82.3% to around 60%, reported The Times of India.
HDFC will continue to have more than 10% interest in Gruh Finance even after the transaction.