HDFC and HDFC Bank shares fall on profit booking a day after merger announcement

Shares of HDFC Limited and HDFC Bank came under selling pressure as profits were booked after staging a massive rally in the previous session, analysts said. In Monday’s session, HDFC rallied a whopping 16%, its biggest single-day move since May 18, 2004 after the merger plan with HDFC Bank was announced. Shares of HDFC Bank also succumbed to profit booking and fell 2.75% to Rs 1,611 during the session.

Meanwhile, analysts hailed the merger between the country’s two largest entities. “The reason for the merger is that regulatory arbitrage between banks and NBFCs has narrowed when the timing was right due to a softer interest rate environment coupled with lower liquidity requirements” , Prabhudas Lilladher said in a report.

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

The share exchange ratio for the merger of HDFC Limited with and into HDFC Bank will be 42 capital shares (credited as fully paid) of the par value of 1 Re each of HDFC Bank for 25 fully paid capital shares nominal capital. Rs 2 value from HDFC Limited. According to the company, HDFC Limited’s stake in HDFC Bank will be extinguished in accordance with the merger plan.

Deepak Parekh, Chairman of HDFC Limited, said: “This is a merger of equals. We believe the housing finance business is poised to grow by leaps and bounds due to the implementation of RERA, the state of housing sector infrastructure and government initiatives such as affordable housing for all, among others.

As of 10:19 a.m., HDFC shares were trading down 2% at Rs 2,623 and HDFC Bank was down 2.74% at Rs 1,611.