If market signals are any indication, the swap ratio in the proposed merger of HDFC Bank and Centurion Bank of Punjab (CBoP) benefits the shareholders of neither bank. The two boards approved a 1:29 swap ratio — shareholders of CBoP will receive one share of HDFC Bank for 29 shares they hold in CBoP — today.On a day when the Sensex rose 302 points and the banking index fell 0.37 per cent, the shares of HDFC Bank closed 3.5 per cent lower at Rs 1,423 while CBoP crashed 14.5 per cent to close at Rs 48.25. The country’s two largest banks, State Bank of India (SBI, with a market capitalisation of Rs 134,367 crore) and ICICI Bank (Rs 123,094 crore), closed marginally higher at Rs 2,127 and Rs 1,110 respectively.“The merger will add to the growth potential of the bank as it will strengthen the geographical reach of the bank,” said Deepak Parekh, chairman, HDFC, founder of HDFC Bank. “None of the Indian banks today find a place amongst the top 10 banks in Asia. The merger is a step forward in that direction.” To put the numbers in perspective, SBI has a market value of $34 billion while Industrial and Commercial Bank of China’s market capitalisation, at $282 billion, is more than eight times SBI’s.The draft scheme of amalgamation, the due diligence report and other matters will be considered by the HDFC Bank board on Thursday. HDFC Bank said its board would consider on Thursday a preferential offer to HDFC.Experts said HDFC Bank was looking to cement its place as India’s second-largest private bank, behind ICICI Bank, and fend off a challenge from Axis Bank (market capitalisation: Rs 34,193 crore).The combined entity will have a nationwide network of 1,148 branches. Deposits would climb to Rs 1,20,000 crore, advances to Rs 85,000 crore while the balance-sheet size would swell to Rs 1,50,000 crore, Parekh said.HDFC Bank MD Aditya Puri will head the merged bank, while Jagdish Capoor will continue as non-executive chairman. Puri said the merger would be smooth as there were no integration bottlenecks. “We have no integration and people issues, the overlap of branches is almost none,” he said. On the question of retrenchment Puri said that there would be no downsizing.
