HDFC, HDFC Bank Shares Fall On Profit Booking A Day After Merger Announcement

Shares of HDFC Limited and HDFC Bank came under selling pressure on account of profit booking after staging a massive upmove in the previous session, analysts said. In Monday's session, HDFC rallied a whopping 16 per cent, its biggest single day move since May 18, 2004 after merger plan with HDFC Bank was announced. HDFC Bank shares also succumbed to profit booking and fell 2.75 per cent to Rs 1,611 during the session.

Meanwhile, analysts have hailed the merger between the country's two largest entities. “The rationale of the merger is that regulatory arbitrage between banks and NBFCs has been reducing while the time was opportune owing to a softer interest rate environment coupled with lower liquidity requirements,” Prabhudas Lilladher said in a report.

The board of Housing Development Finance Corporation (HDFC) Limited on Monday approved the merger of HDFC Limited with the HDFC Bank.

The share exchange ratio for the amalgamation of HDFC Limited with and into HDFC Bank shall be 42 equity shares (credited as fully paid up) of the face value of Re 1 each of HDFC Bank for every 25 fully paid-up equity shares of the face value of Rs 2 of HDFC Limited. According to the company, HDFC Limited’s shareholding in HDFC Bank will be extinguished as per the scheme of amalgamation. 

Deepak Parekh, the Chairman of HDFC Limited said, “This is a merger of equals. We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, the infrastructure status of the housing sector, and government initiatives like affordable housing for all, amongst others.”

As of 10:19 am, HDFC shares traded 2 per cent lower at Rs 2,623 and HDFC Bank declined 2.74 per cent to Rs 1,611.