Merger effective today has created the World’s Fourth Largest Commercial Bank – HDFC Bank and presents an opportunity for the investors on the backbone of stabilized inflation rate and merger arbitrage selling behind us. We believe HDFC Bank holds an estimated 20% upside potential from its current closing price (INR 1,700.75 NSE & $69.70 NYSE).
Rationales for the Bullish call:
- The merger has given rise to an incredible financial powerhouse with a market cap of $172 billion
- 4th largest bank behind JP Morgan, ICBC (China’s Industrial and Commercial Bank) and Bank of America
- The combined entity boasts an extensive network, serving 120 million customers through 8,300 branches
- The largest private bank in India ideally positioned to capitalize on India’s rapidly growing emerging market, which promises a remarkable 6% GDP growth
- The bank’s plans to grow its loan book by 20% over the next four years
- The merger will further drive bank deposit growth as it opens avenues for 70% of its parent’s clients who do not yet have an account at HDFC Bank
- HDFC Bank will become second most valuable Indian company in terms of market capitalisation after Reliance Industries
- Weightage in NIFTY Index will be close to 15%
- After merger, HDFC Securities, HDFC AMC, HDFC Ergo GIC, HDFC Capital Advisors and HDFC Life Insurance would become one of the key subsidiaries of HDFC Bank. So, big development in any of these companies may lead to change in price of HDFC Bank shares after the merger.