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HDFC BANK & TIMES BANK

MERGER

PRIYANKA AGGARWAL

6833

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HDFC BANK

HDFC bank incorporated in 1994 by Housing Development Finance Corporation Limited(HDFC), it was amongst the first to receive an 'in principle' approval from the ReserveBank of India (RBI) to set up a bank in the private sector.

currently has an nationwide network of 1,986 Branches and 5,471 ATM's in 996 Indiantowns and cities.

HDFC bank provide wholesale banking services, retail banking services, treasury. Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th

July 2010

The MD of the bank is Mr. Aditya Puri

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Times bank Times bank was incorporated on 6 th july,1994.

The Bank was promoted by Bennett, Coleman and Co. limited & its subsidiaries.

The Bank is in the process of tying-up with Brokering and Research Outfits for makingWealth Management Services available for its premium clients.

Times Bank is also a Depository Participant with National Securities DepositoryLimited & provides services for investing in the shares and debentures in thedematerialised form.

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MERGER

In a milestone transaction in the Indian banking industry, Times Bank Limited wasmerged with HDFC Bank Ltd.on February 26, 2000.

This was the first merger of two private banks in the New Generation Private Sector Banks.

As per the scheme of amalgamation approved by the shareholders of both banks and theReserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank.

Stock swap ratio - 1: 5.75

This was the first deal which took place in the Indian banking sector which was marketled.

Total market value of the deal was 5775.75 Million Rs and it was a total stock deal .

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easons.. Branch network would increase by over 50% & thus providing increased geographical

coverage. Increase the total number of retail customer accounts so as to increase deposit & loan

products. After the merger the bank would be able to use Times Bank's lower cost alternative channels

like phone banking, internet banking etc. and thereby the reducing of operating costs. The merger would increase the presence of HDFC bank in the depository participant

activities. Improved infra structure facilities and central processing would help in deriving economies of

large scale.

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Eff ects o f merger

At the time of merger, Times Bank was suffering with low profitability and high NPAs; theacquisition by HDFC bank has given relief to both shareholders and depositors of the bank.

Similarly HDFC bank has gained out of retail portfolio of the Times Bank and subsequentlyemerged as largest private sector bank in India.

The Bennett Coleman group, which promoted the Times Bank, got 7.5 percent stake in HDFCBank.

The equity capital of HDFC Bank increased from Rs. 200 crore to Rs. 233 crore. This merger increased the customer base of HDFC Bank by 2,00,000 taking the figure to

6,50,000. It also provided cross-selling opportunities to the increased customer population. The branch network increased from 68 to 107. HDFC Banks total deposits would be around Rs. 6,900 crore and the size of the balance

sheet would be over Rs.9, 000 crore.

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Item Combined pre-merger average

Post merger (%)

Total income 36.39 59.03

EB T 22.65 47.63

PAT 2 3.78 57.3 2

N et revenue per branch

-7.14 2 6.75

Income to

deposit

1.51 9.88

FINDINGS

S uccess f ul deal..

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Conclusions1. Before the merger the combined average non-operating losses of the bank was only 2.2 per cent of the total income. But that has increased to 6.15 per cent after the merger.

2. The average spread has increased by 10 per cent after the merger. This implies that HDFCBank has truly benefited by merging with Times bank who had a good retail banking

business.3. During the pre merger era the combined entity used to consume only 8.08 per cent of itstotal income for provisions. But after the merger this increased to 13.82 per cent denoting arising level of N.P.A

4. After the merger the bank has been following a policy of generating income from non- business activities.This is very clear from the investment deposit ratio.

5. The post merged HDFC bank has been able to mobilize more amount of cheap funds in theform of current and savings deposits. So it can inferred that the HDFC bank could properlyutilize the good foundation that Times bank had in retail banking.

6. The merger deal did not result in a huge dilution of ownership as the Times group promoters got only a 7% stake in the newly merged entity.

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TH ANK YOU..!!