Deepak Parekh set to hang up his boots; it’s the end of an era for Indian Banking

Life has come full circle for Deepak Shantilal Parekh, the 78-year old Chairman of HDFC Limited, and a doyen of the Indian banking sector. Deepak Parekh’s reign at the helm of HDFC has come to an end, with the merger between HDFC and HDFC Bank becoming a reality. He would be ineligible to serve on the bank’s board after the merger, owing to RBI’s rules on age limits.

In his final act, Parekh stitched together the biggest corporate merger in India’s history, creating a financial behemoth by bringing HDFC under the fold of HDFC Bank. By doing this, he has left behind a legacy that will probably be impossible to match in India’s financial services sector.

“After turning the dream of owning a home into reality for millions of Indians in the course of its 45-year journey, Housing Development Finance Corporation has found a home within the family…"As the son grows older, he acquires the father's business,” with these words, Parekh had announced the merger of the two entities in April last year. The merger is now nearly completed, with the boards meeting today (July 1) to approve the merger.

Under Parekh, HDFC has provided more than 9 million Indians with home loans and grew its loan book to Rs 7.24 lakh crores. The mortage lender now commands more than a third of the overall home loan market.

Believe it or not, housing finance was an alien concept for Indians in the 1970s; lending directly to middle class Indian households was looked upon with great scepticism.

The story goes that the scepticism around HDFC Limited was such that when Deepak Parekh went to meet the Chairman of UTI to seek an investment in the lender’s IPO as UTI was then the only equity mutual fund in India.

UTI turned down Parekh’s request, claiming that retail lending was too risky a business for it to put money in. When HDFC Ltd. went public in its first year of its incorporation, its IPO flopped, and the stock traded at a 20 percent discount to its issue price on the day it got listed. Ironically, 5 years later, looking at HDFC’s success in mortgage lending, UTI became the company’s largest shareholder.

By the late 1980s, HDFC Ltd. had firmly established its credibility not only in India but also globally, it was successfully raising long term funding from the International Finance Corporation, World Bank and the United States Agency for International Development. By 1985, Deepak Parekh had risen to the post of Managing Director and by 1993, the executive Chairman of HDFC Ltd.

Banking is in Deepak Parekh’s blood – his grandfather was the first employee of Central Bank of India. His father was the deputy managing director of Central Bank and his uncle, the legendary Hasmukhbhai Parekh, fondly known as HTP was the Chairman of ICICI before he founded HDFC Limited in 1977 with an initial share capital of Rs 10 crores.

Deepak Parekh joined his uncle’s firm HDFC Limited as a Deputy General Manager in 1978. Up until then, a young Deepak Parekh was working at Chase Manhattan as its assistant representative for South Asia, and it took some convincing from his uncle to leave the cushy MNC job to come join a one-year old company, at nearly half his current salary then.

The rest, as they say, is history.

In some ways, Deepak Parekh can also be credited with the formation of HDFC Bank.

When bank licences were opened up for the private sector in 1993, and Deepak Parekh wanted to enter the business, he faced a lot of pushback from HDFC Limited’s board, but they eventually relented, and by August 1994, after receiving the licence from RBI, HDFC Bank was created.

Similarly, it was Deepak Parekh’s longstanding personal relationship with Gerry Grimstone, the then-Chairman of Standard Life, that led a joint venture between the two companies, and HDFC Life was created in early 2000s.

Over the past 45 years with HDFC Ltd., Deepak Parekh has been responsible for taking 5 companies public and stitched together at least 7 M&A deals.

It is only apt that the investment banker stitched this one final deal, which will pave the way for the creation of one the world’s fourth most valuable financial institution, with a market capitalistion of almost Rs 15 lakh crores, only behind American banks like JP Morgan, Bank of America and China's ICBC.

In his last letter to the shareholders of HDFC Limited, for who he created immense wealth, Parekh said, "It is my time to hang my boots with both anticipation and hope for the future. While this will be my last communication to shareholders of HDFC, rest assured we now stride tall into a very exciting future of growth and prosperity. The HDFC experience is invaluable. Our history cannot be erased and our legacy will be taken forward."

Parekh said the biggest risk today was status quo, and with change would come the power of adaptability, growth and new aspirations.

What the future holds, only time will tell. The biggest risk organisations face today is staying with the status quo, believing what worked well yesterday will continue in the future. Change takes courage as it displaces one from the cocoon of comfort and familiarity.  Yet, with change comes the power of adaptability, growth and new aspirations.  The orchestration of this merger is to ensure that the future is not constrained for any of our stakeholders.”

As HDFC hands the baton, Parekh said his wish is that the core founding values of kindness, fairness, efficiency and effectiveness gets woven deeper into the fabric of the HDFC group.

"An oft-repeated question is what happens to the culture of HDFC? My answer to this is that mergers are inherently about change.  The work culture will be an amalgamation of the best of both organisations. Culture at the workplace is always a shared responsibility. It needs daily reinforcement through the demonstration effect with the tone set at the top. What remains steadfast is the underlying ethics and value systems of both entities. The confidence I derive is the agreed tenet of this integration -- preserving the fabric of the 'HDFC way of working'," he said.