Merger between HDFC Bank & Centurion Bank of Punjab

MBA 2009-12 Group 1 Debojyoti Guha (16) Poulami Chakraborty (22) Prasenjit Roychoudhury(25) Sarup Paul(32)

Subhajit Ghosh (39)

Suman Chakraborty (44)

Agenda

Background History of HDFC bank History of Centurion Bank of Punjab Environmental factors Context of Merger Challenges towards Merger Merge Financials Outcome of the merger Learning from the merger

Background

The Reserve Bank of India sanctioned the Scheme of Amalgamation of Centurion Bank of Punjab Ltd. with HDFC Bank Ltd in exercise of the powers contained in Sub-section (4) of Section 44A of the Banking Regulation Act, 1949. All branches of CboP => branches of HDFC Bank Nationwide network of 1,167 branches Deposit base of around Rs. 1,22,000 Net advances of around Rs. 89,000 crores Balance sheet size would be over Rs. 1,63,000 crores

Agenda

Background History of HDFC bank History of Centurion Bank of Punjab Environmental factors Objectives of Merger Challenges towards Merger Merger financials Outcome Learning

HDFC Bank
1994- HDFC Bank was incorporated by Housing Development Finance Corporation Limited (HDFC), India's largest housing finance company 2000-Times Bank Limited (owned by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd.

This was the first merger of two private banks in India. Shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank.

2008 - HDFC Bank acquired Centurion Bank of Punjab

Source : Wikipedia

Agenda

Background History of HDFC bank History of Centurion Bank of Punjab Environmental factors Objectives of Merger Challenges towards Merger Merger financials Outcome Learning

Centurion Bank of Punjab

1994 Centurion Bank was incorporated -Joint venture between 20th Century Finance Corporation and its associates and Keppel Group of Singapore 1995 Centurion Bank amalgamated 20th Century Finance Corporation. 2005 Merger of Centurion Bank and Bank of Punjab 2006 Centurion Bank of Punjab acquired Kochi-based Lord Krishna Bank. 2008 HDFC Bank acquired Centurion Bank of Punjab.

Source : Wikipedia

Agenda

Background History of HDFC bank History of Centurion Bank of Punjab Environmental factors Objectives of Merger Challenges towards Merger Merger financials Outcome Learning

Environmental factors

Indian banks on a growth face

Hard to get metro licenses Increased competition from foreign and domestic *next generation* banks

Objectives

Increase in scale of operations Expanding metro reach Widening the line of products To get more dominance on the market Counter competition HDFCs Brand leverage and increased utilization of CBOP Branches CBOPs SME focus complement HDFCs Corporate focus Natural synergy owing to strong foothold in vehicle financing

Expanding Metro Reach

CBOP Metro Non Metro Metro Proportion Non Metro Proportion 127 267 32% 68%

HDFC 287 467 38% 62%

Product Portfolios

Challenges

HR challenges

Operational challenges

Technological challenges

Infrastructure challenges

Agenda

Background History of HDFC bank History of Centurion Bank of Punjab Environmental factors Objectives of Merger Challenges towards Merger Merger financials Outcome of the merger Learning from the merger

Merger financials
POST MERGER SNAPSHOT (Rs M) HDFC Bank CBOP Merged Dec-07 Dec-07 Dec-07 754 394 1148 1906 452 2358 Branch ATM Liabilitis Deposits CASA Deposits CASA % Share Capital Net worth Other Liabilities Total Liabilitis Asset Advances Retail Other assets Goodwill Total Assets

993869 505630 50.87 3541 113584 206942 1314395

207100 50740 24.50 1857 19633 27306 254039

1200969 556370 46.33 4301 225742 234248 1660959

713868 364073 600527 1314395

150835 90228 103204 254039

864703 454301 703731 92525 1660959

At a swap ratio of 1:29, it would lead to dilution of 21% for HDFC Bank. HDFC Bank would issue 76m shares ( fully diluted) to CboP shareholders. The merger would worsen HDFC Banks RoEs

Source:Corporate Restructuring via Amalgamation in Private Sector Banks A Case Study of HDFC Bank and Centurion Bank of Punjab -Prof. Deepak Tandon ,Manish Vohra & Meenakshi Saluja

Agenda

Background History of HDFC bank History of Centurion Bank of Punjab Environmental factors Context of Merger Challenges towards Merger Merger financials Outcome of the merger Learning from the merger

Outcome

Increased footprint and wider distribution reach Expand metro reach by 44% HDFC bank emerge as the biggest private bank in terms of branches There is scope to enhance productivity and improved utilization of branches Higher productivity help HDFC bank to bring down cost to income ratio Merger resulted in having a strong and experienced management team Near term performance likely to be muted, benefits to accrue over medium term

Agenda
Background History of HDFC bank History of Centurion Bank of Punjab Environmental factors Objectives of Merger Challenges towards Merger Merger financials Outcome of the merger Learning from the merger

Key Learning
Integrating of IT systems without disrupting customer service Mapping of Employees Customer communication Elimination of redundancies Top management vision Coordination between different functions Structuring of the deal and tax implications

Thank You!