HDFC merger to lower costs for Indian rupee debt borrowers

BLOOMBERG 

Housing Development Finance Corp, India’s largest mortgage financier, merging into HDFC Bank Ltd is likely to lead to a drop in borrowing costs in the rupee bond market, a senior official at the merged unit, said.
“If the amount of supply comes down and demand remains the same, then prices will reflect that,” Keki Mistry, a non-executive director on the board of HDFC Bank and the outgoing chief executive officer of HDFC Ltd said in an interview. The lender was India’s biggest local currency bond seller in 2022.
The consolidation will create a more than $170 billion financial services behemoth, and the mortgage business will be able to tap the bank’s deposits to grow rather than pile on more debt. Other top-rated borrowers will have access to a larger pool of credit following the exit of HDFC from the market.
The merger also helps boost valuation for the financier’s shareholders as the holding company discount ceases to exist, Mistry said. Most analysts have valued HDFC’s more than 20% holding in the bank at a discount of as much as 40% to the market price, according to him.