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Hdfc twins continue to slide for third straight day and give up most gains from merger announcement


Hdfc twins continue to slide for third straight day and give up most gains from merger announcement

To buy to sell HDFC Bank to share

Shares of Housing Development Finance Corporation (HDFC) and HDFC Bank continued to fall for the third consecutive session on Thursday, giving up nearly all of their gains on Monday after the financial services majors announced a merger between they.

HDFC shares fell by as much as Rs 70.5 or 2.8% to Rs 2,515 on BSE on Thursday. HDFC Bank’s share fell by Rs 33.8 or 2.2% to Rs 1,517.1.

Shares of HDFC Bank are down 4.8% so far in 2022 and HDFC are down 1.9%, compared to a return of 2.6% for Nifty50 and 6.1% for Nifty Bank.

On Monday, the announcement of the merger had triggered a nearly 10% jump in stocks – their biggest intraday gains in 13 years.

The proposed merger between HDFC and HDFC Bank, subject to shareholder and regulatory approvals, is expected to create one of the largest lenders in the world. Currently, HDFC holds an approximate 21% stake in HDFC Bank.

As part of the merger, shareholders will receive 42 HDFC Bank shares for every 25 HDFC shares.

Many analysts view the proposed merger between HDFC Bank and HDFC Bank positively.

According to Morgan Stanley, the merger benefits both HDFC and HDFC Bank, and will be accretive to earnings per share in the first full year.

Market expert Mehraboon J Irani finds HDFC to be a better bet between the two at present.

“You have to accept the fact that it should be at least 3 or 4 quarters before this particular marriage materializes. As normally happens when this announcement happened, the market was in turmoil. Everyone wanted buy the stocks and now people realize that a lot of trouble is going to be thrown around, if the insurance vertical is going to be part of a full bank,” he told CNBC-TV18.

Given the price-to-book ratios of the two companies over the past 3-4 years, there’s nothing wrong with holding onto shares of HDFC Bank and HDFC, he said.

The synergy between the two companies will be positive in his eyes.

KRChoksey’s Deven Choksey told CNBC-TV18 that he thinks the fundamental image of both companies remains extremely compelling.

He likes the merger for the increased size of mortgage assets on the books and a steady stream of income and believes it will help the two expand their customer base.

First post: STI


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