HDFC CBoP Merger

The Largest Indian Private Banking Merger

Promoted by HDFC in 1995

Serving more than 11 million customers in more than 300 cities Total 800 branches and 2000 ATMs

One of the leading Pvt sector banks in India Lord Krishna bank merged with CBoP in 2007 400 branches 452 ATMs in 180 locations Employee base of 7500 CBOP is also a strong player in foreign exchange services, personal loans, mortgages and offers a full suite of NRI banking products to overseas Indians.

How They Benefit from the Merger

The merger will be a win-win situation for HDFC Bank as it would acquire around 400 branches and skilled personnel. Greater access to North as well as South of India would also strengthen their presence in those regions. Natural synergy of vehicle financing

CBOPs profit constitutes 11% of that of HDFC Bank. Access to technology of HDFC HDFC has huge retail deposit franchise HDFCs brand value The current market capitalization of HDFC Bank is Rs 52,263 crore,

The Financial Data

The share swap ratio for the proposed merger of Centurion Bank of Punjab with HDFC Bank was 1:29 HDFC Bank was expected to pay Rs 10,000-Rs 12,000 crores (Rs 100-120 billion) in shares for absorbing CBoP Post merger HDFC Bank becoming the 7th largest bank with asset size of Rs.1097 billion The combined entity having 1,100-1,200 branches Pooling of Interest Methods used for accounting

The EPS Analysis

The earnings of HDFC bank in 2007 was Rs 11414500000
The earnings of CBoP in 2007 was Rs 1213800000 No of shares of HDFC bank in 2007 was 319389608

No of shares of CBoP in 2007 was 1698989540

EPS of HDFC bank in 2007 was Rs 35.74 EPS of CBoP in 2007 was Rs 0.72 Exchange ratio = 1 sh of HDFC Bank/ 29 sh of CBoP = 0.03448 Total no of shares of the merger = 319389608 + 0.03448*1698989540 = 377975454 Final EPS = (11414500000 + 1213800000) / 377975454 = 33.41

HDFC Bank pre merger EPS = 35.74 HDFC Bank post merger EPS = 33.41
So, there would be a slight dilution for HDFC Bank in the medium-term. CBoP parameters are currently down because it recently acquired Lord Krishna Bank. Turnaround is expected to happen and the parameters, as per revenues per branches or profitability per branches for CBOP, are expected to improve as HDFC Bank takes over. So, in the short-term, it might be dilutive for HDFC Banks earnings. But in the longer-term, the merger is expected to be in favour of HDFC Bank.

Thank You!
Presentation Prepared by:

Debarshi Das (Roll 08) Goutam Shit (Roll) Prattoy Chatterjee (Roll) Priyanka Dey (Roll) & Sourav Biswas (Roll)