MUMBAI: The boards of HDFC Bank and Centurion Bank of Punjab met on Saturday to give an in-principle approval for the two banks’ merger — the largest in the Indian banking sector. The boards will again meet on Monday to decide on the swap ratio which is likely to be in the region of 1:27-1:28 — a CBoP shareholder would get one share of HDFC bank for every 27-28 shares he/she holds. The deal which will be the largest in the banking sector in India is likely to be at over Rs 10,000 crore. The share-exchange ratio would be worked around Rs 56 a share of CBoP.
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The banks have jointly appointed CA firm Dalal & Shah, and Ernst & Young as independent valuers to determine the share swap ratio. J Sagar Associates has been appointed as the legal advisor for the transaction. The combined balance sheet size of the merged entity would be Rs 1,56,842 crore, making it the sixth largest bank in the country. While the merged entity will have the maximum number of branches among private banks, its asset size will still be far below ICICI Bank’s. HDFC Bank has 754 branches and has RBI’s permission to add another 250 branches, which would bring its network on par with ICICI Bank. The addition of 394 branches of CBoP will help the bank leap frog ahead of ICICI Bank, in terms of branch presence. Both the boards will again meet on February 28 to approve the scheme of merger and call extra -ordinary general meetings of their respective shareholders. CBoP MD Shailendra Bhandari will join the board of the merged entity. Rana Talwar, the current chairman of CBoP, may become the non-executive chairman of the merged entity. A decision on the remaining senior executives of CBoP will be taken over the next few weeks. The merger would also help HDFC Bank to get an additional leeway in its capital market business, where it is one of the strongest players. HDFC will see its shareholding in the bank fall to less than 19% from the current 23.28%. The mortgage player will increase its shareholding in the bank to to above 20% by buying from the market or subscribing to a fresh issue of HDFC Bank shares.