We
were among the first to get a banking licence, the first
to do a merger in the private sector with Times Bank
in 1999, and now it would be the largest merger in the
private sector banking space in India. HDFC Bank was
looking for an appropriate merger opportunity that would
add scale, geography and experienced staff to its franchise.
This opportunity arose and we thought it was an attractive
route to supplement HDFC Bank's organic growth. We believed
that CBOP would be the right fit in terms of culture,
strategic intent and approach to business.
In
India, bank lending has been a significant driver of
Gross Domestic Product (GDP) growth. The Indian banking
industry may now compare itself reasonably well with
the rest of Asia in areas like growth, profitability
and low rate of Non-Performing Assets (NPAs). But the
greatest challenge that the Indian banking sector will
face is the one that emanates from foreign shores. With
the global interest rates reaching high, a number of
foreign players are showing a strong interest in the
Indian market. It is a well-known fact that foreign
banks have been looking for `good buys' in the banking
sector for sometime now. However, their game plan has
so far been thwarted by the regulatory requirements.
However,
with the Reserve Bank of India (RBI) outlining a roadmap
for foreign banks by relaxing the stringent requirements,
the stage is set for a full-fledged presence of foreign
players in the Indian banking market, post-April 2009.
With the entry of foreign players with their huge resources,
size of the banks is bound to be of great importance.
Large-scale consolidation in the banking sector will
be required to face them on a more or less equal footing.
Private sector lender HDFC Bank's merger with Centurion
Bank of Punjab (CBOP) in February 2008 has driven Indian
Inc.'s merger and acquisition deal volume amounted to
$2.9 bn. The total number of merger and acquisition
deals announced in the month of February stood at 36.
In comparison, there were 56 merger and acquisition
deals in January 2008 with a total announced value of
$3.01 bn. The merger of CBOP with HDFC is India's biggest-ever
merger in the financial sector. After the merger, HDFC
is the third largest bank in terms of assets in India
after SBI and ICICI Bank. |
