March 21, 2023

Great Indian Mutiny

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Distrust of the largest banking link in Indian history through EFE

© Reuters. Distrust of the largest banking link in Indian history

New Delhi, Apr 18 (.) .- The forthcoming merger between HDFC Bank, India’s largest private sector bank and HDFC Limited, the country’s largest mortgage lender, has failed to meet early market expectations, with its prices falling sharply. Shares.

Following an initial increase in the value of the two companies’ shares in the Indian National Stock Exchange (NSE), it was 10% in the case of HDFC Bank and 8.7% in the case of HDFC Limited. On the day the merger was announced on April 4, investors were cautious about the move.

“There are some concerns that the market is aware of and is now reflecting on stock prices,” Karan Gupta, director of financial institutions for Indian ratings and research, told Efe on Monday.

According to Gupta, some doubts focus on whether HDFC Bank should meet the requirements of the cash balance ratio and legal liquidity, the regulatory requirements for obtaining the portfolio of HDFC Limited, the private sector credit requirements and the costs associated with the merger. , Before starting to give benefits.

If approved by the Reserve Bank of India (RBI), the full consolidation will take place in mid-2023 and will become the largest in the history of the country, making it one of the largest financial institutions in India. Assets valued at $ 359,000 million as of September 2021.

In addition, HDFC Ltd will add another $ 59,000 million to its $ 110,000 million market capitalization as of April 1.

The size of these figures caused great anticipation among investors, and on April 4, HDFC Bank announced that it was going to merge with HDFC Limited, which acquired a 100% mortgage issuer, which was 21% of the bank and will not operate after the merger.

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Flying Optimism

However, this optimism did not go beyond the first 24 hours, after which the stock price did nothing but fall, not even reaching the level recorded before the merger announcement.

Therefore, the heads of both financial groups this Monday recorded an 18% drop in the price of their shares compared to the maximum value reached on the day of the announcement.

“The market may have overcrowded in the short term. However, the team is still there and they will resolve these issues, though it may take some time,” Gupta said.

Both business groups did not want to comment when asked by Efe.

The merger comes in the context of the Reserve Bank of India (RBI) initiating some regulatory changes for banks and non-bank financial institutions, which will reduce barriers to potential mergers.

Currently, HDFC Bank has over 6,300 bank branches and over 17,000 ATMs, with HDFC Ltd having 651 branches.