Bandhan Bank Ltd to combine with Gruh Finance in a $11.7bn deal

India's Bandhan Bank Ltd to buy mortgage provider Gruh Finance Ltd in a share-swap deal to build up its housing loan portfolio. Shareholders of Gruh Finance, including its majority shareholder Housing Development Finance Corp., India’s biggest mortgage lender, will get 568 shares of Bandhan Bank (worth INR10) for every 1000 they own (worth INR2). The deal is valued at about INR818bn ($11.7 billion), based on closing share prices on day before announcement. The deal will help Bandhan Bank’s main shareholder, Bandhan Financial Holdings Ltd, reduce its stake in the lender to just above 60%. Last year, the Reserve Bank of India withdrew permission for Bandhan Bank to open new branches and froze its chief executive’s salary for failing to bring down Bandhan Financial Holdings’ stake to below 40%. HDFC holds 57.83% stake in Gruh Finance, which will come down to about 15% after the merger. Bandhan Bank counts Singapore sovereign wealth fund GIC Pte Ltd and World Bank arm International Finance Corporation among its investors. GIC owns a 4.6% stake in the bank while IFC hold 1.8%. "The micro credit or unsecured portfolio will fall from the current levels of 86% to 58%, thanks to the presence of secured home loans in the combined portfolio. Also, the average tenure of the loans will also go up since Gruh loans tend to have tenure of three years whereas we give loans of one-year," Chandrasekhar Ghosh, founder and CEO of Bandhan Bank, said.