HDFC Bank market value jumps to $157 billion as shares rise post HDFC-merger

By India Today Business Desk: HDFC Bank, one of India’s leading private lenders, reached a historic milestone on Monday as its shares soared to a record high following the merger with Housing Development Finance Corp (HDFC).

The merger propelled HDFC Bank into the prestigious list of the world’s top 10 banks by market capitalisation.

On Monday, HDFC Bank’s shares surged as much as 3.3 per cent in early trade to reach an all-time high of Rs 1,757.50, while HDFC’s shares rose by 3.7 per cent to Rs 2,927.40, marking their highest level since the merger was initially announced in April 2022.

Among the world’s top banks

With a market capitalisation of approximately $157 billion, the combined entity now surpasses renowned global lenders such as Morgan Stanley and HSBC Holdings.

This $40 billion merger, the largest in India’s corporate history, positions the newly formed financial powerhouse to underwrite larger ticket loans, including those for infrastructure projects.

The merger has proven to be a catalyst for both HDFC Bank and HDFC, as their share prices have outperformed the benchmark Nifty 50 index with gains of about 14.5 per cent and over 17 per cent, respectively, since the announcement of the deal.

Also Read | HDFC-HDFC Bank merger to be effective July 1, shares rise nearly 2%

Market analysts, including Morgan Stanley, find HDFC Bank’s valuation attractive, considering the synergies created by the merger. The private lender gains access to a broad customer base and secured long-tenor retail mortgage products, which are expected to drive loan growth.

Morgan Stanley predicts that the merged entity’s loan growth will accelerate to 17-18 per cent in the coming quarters, up from the current rate of 15-16 per cent, with a particular focus on mortgage loans.

In light of these developments, Morgan Stanley has resumed coverage of HDFC Bank with an ‘overweight’ rating and set a target price of Rs 2,110 per share, indicating a potential 26 per cent upside from its previous closing price.

Poised for strong future growth

Sashidhar Jagdishan, the managing director and CEO of HDFC Bank, shared his optimistic outlook for the newly merged entity, expressing the potential to create a new HDFC Bank every four years due to their ambitious growth plans.

He emphasised that the combined entity, armed with a robust distribution network, expanding customer base, strong capitalization, and healthy financial performance, is well-positioned to capture future growth opportunities.

HDFC and HDFC Bank have set July 13 as the “record date” for swapping HDFC’s shares with HDFC Bank’s stock for its shareholders, solidifying their integration and signaling the beginning of a new chapter for the banking conglomerate.

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