Mistry said that besides the cost of funds, the merger would also create headroom for foreign investors to pick up an additional 13% of the merged entity. This would happen because of the cancellation of HDFC’s shares in the bank, a move that would also improve the return on equity.
Speaking at Times Network’s flagship event, India Economic Conclave, Mistry said that the merger would expand the banking industry. “The size of the banking industry has increased significantly in the past 5-10 years and now with the HDFC-HDFC Bank merger being announced that will help (industry grow),” said Mistry. He was talking in the context of India having more banks among the global top 10 lenders.
According to Mistry, housing finance would continue to grow in the country. This would be a big opportunity for HDFC Bank in future as not all banks are able to provide home loans. “The total outstanding home loans in India as a percentage of GDP is less than 11%. If you look at this number in the US or the UK, it will be in 60s or 70s. In China, it is somewhere in the mid-20s,” he said.
“For most people in India, culturally, owning a house is really big and, in my view, will continue to be the single most important possession for a family,” he said. The HDFC chief also said that the inflation in commodities would not hurt home loan prices as much because a large part of the cost was due to the cost of land, which was not seeing inflation.