Prabhudas Lilladher's research report on HDFC Bank
The Indian banking space witnessed a historic event today with HDFC Ltd. deciding to merge into HDFC Bank and the transaction would take ~18 months to complete. 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. As at Dec’21, the total loan size of the merged entity would be ~Rs18trn with the share of mortgages expected to increase from 11% to 33%. Since a chunk of HDFC Ltd.’s customers do not have a banking relationship, this would provide tremendous cross-sell opportunities.
Outlook
While the merger makes sense in terms of scale, we are watchful that margins could compress post the merger which could be a drag on the RoE. We maintain multiple at 3.6x but roll forward to FY24 ABV to arrive at a TP of Rs. 2,000. Maintain ‘BUY’.
More Info
At 12:07 hrs HDFC Bank was quoting at Rs 1,612.95, down Rs 43.50, or 2.63 percent.
It has touched an intraday high of Rs 1,671.00 and an intraday low of Rs 1,605.55.
It was trading with volumes of 272,683 shares, compared to its thirty day average of 475,134 shares, a decrease of -42.61 percent.
In the previous trading session, the share closed up 9.97 percent or Rs 150.15 at Rs 1,656.45.
The share touched its 52-week high Rs 1,724.30 and 52-week low Rs 1,292.00 on 18 October, 2021 and 08 March, 2022, respectively.
Currently, it is trading 6.46 percent below its 52-week high and 24.84 percent above its 52-week low.
Market capitalisation stands at Rs 894,468.03 crore.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Read More
