Talks on for Bandhan Bank, GRUH Finance merger

Bandhan Bank and Housing Development Finance Corp (HDFC) are in discussions for a possible merger between Bandhan and GRUH Finance, two people familiar with the development said.

The merger between Bandhan and a home financing subsidiary of India’s mortgage-lending pioneer is likely to involve a share-swap deal, sources said. The transaction would help Bandhan reduce its promoter holding in the lender from 82.28 per cent. The swap ratio would determine the extent of the stake dilution, which is mandated by banking regulations.

HDFC, for its part, described the talks as “speculative in nature” in its statement to the stock exchanges. “…As a business strategy, GRUH Finance…explores various business opportunities for the sale of its loan assets and other feasible modes of organic and inorganic growth… There is no decision taken and/or negotiations by the board of the corporation or GRUH, which would require a disclosure under the listing norms,” HDFC said.

Bandhan Bank chief executive Chandra Shekhar Ghosh did not respond to repeated phone calls or text messages.

Kolkata-based Bandhan Bank has been looking to take the M&A route to bring down the stake of Bandhan Financial Holdings to 40 per cent as per the Reserve Bank of India (RBI) mandate. The deadline was August

22. The RBI imposed curbs on Bandhan Bank for its failure to adhere to the deadline, making it mandatory to seek the regulator’s approval before it opened new branches. The curbs included a freeze on the chief executive’s remuneration.

A market expert following the deal said that the proposed merger would not entirely solve the stake-related issue in one go.