Is HDFC’s merger with its subsidiary a bailout plan?

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Editor's note: No one turns down Deepak Parekh, the non-executive chairman of Housing Development Finance Corp. Ltd, India’s biggest home loan lender. After all, he is among the most respected executives in the corporate world, credited with having laid the foundation of the mortgage loan business in the country and on the boards of several companies. Yet, it turns out that in 2017, when Parekh broached the subject of a merger between HDFC with its more valuable listed subsidiary HDFC Bank, to create India’s most valuable financial entity, it was shot down quietly.  In banking circles, the reasons for this were ascribed to an ego clash between Parekh and Aditya Puri, then CEO of HDFC Bank. HDFC's top management was senior in age, whereas the bank had younger management. But, Puri felt that since the bank had surpassed its parent in financial metrics, its executives should call the shots in the merged entity. Parekh, on his part, was said to be uncomfortable with his team playing second fiddle.  It now transpires that there were deeper reasons for the merger not going through. …