After the big boost to the financial pack on news of the mega merger between HDFC and HDFC Bank, here's how experts are reading the space.
Buy / Sell HDFC Bank share
Banking stocks are back in the spotlight on Dalal Street boosted by the news of a mega merger between Housing Development Finance Corp (HDFC) and HDFC Bank.
HDFC currently holds around 21 percent in HDFC Bank. Under the proposed merger, subject to shareholder and regulatory nods, shareholders will get 42 shares in HDFC Bank for every 25 shares held in HDFC.
The HDFC twins took a breather on Tuesday, a day after surging almost 10 per cent each - their biggest intraday gain in 13 years - following the merger announcement.
As of Monday's close, the Nifty Bank has gained 18.2 percent in the past one year as against the benchmark Nifty50's 23.3 percent return.
The Nifty Bank tracks the performance of 12 major lenders in the country including SBI, HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank.
Vetri Subramaniam, Chief Investment Officer of UTI Asset Management, told CNBC-TV18 he is positive on the financial and banking system, which is dominated by 8-9 lenders. Subramaniam is of the view that the merger is logical but is unsure on whether there will be more consolidation in the space.
He is optimistic on a pickup in credit growth going forward.
The remarks from the fund manager come close on the heels of business updates by a slew of lenders showing a pickup in loan growth as well as deposits.
Here's how experts that CNBC-TV18 interacted with are viewing the merger and the road ahead for the entire financial pack:
Vetri Subramaniam, UTI Asset Management
"I do not think it (merger) dramatically changes the picture. I do not think it causes more consolidation to happen. I think we need to keep in mind that this consolidation was also driven by the fact at some level, there were issues related to one company being the promoter of the other, having to continuously pump money to maintain its stake."
"They really simplified their own ownership structure through this and that was perhaps as important as the fact that there would be synergies for the combined entity.”
"When we look at the share of these 8-10 lenders in terms of incremental lending, that's happening in the sector, or we look at it in terms of their share of incremental deposits; it's already quite high. The incremental market share gains to these set of champions is already rather high, it might move up marginally more as well.”
Dipan Mehta, Director, Elixir Equities:
"If you have an underweight position in HDFC group companies combined, even at these levels it makes sense to go at least 5- 7 percent in your portfolio on a merged basis. Considering the kind of growth that HDFC Bank has just reported and the fact that many opportunities to cross-sell will emerge when the companies are merged, it augurs very well for the companies."
"Elixir and its clients are invested in both HDFC and HDFC Bank."
Rana Gupta, Senior Portfolio Manager and India Equity Specialist at Manulife Investment Management:
"Mergers and acquisitions, and the consolidation trend has been playing out for a while, and we could see more of it. The HDFC-HDFC Bank merger underlines the significance of long duration asset books and stability on the books... Large NBFCs also need a solid funding franchise or low cost deposits. What it highlights is that for the financial sector, both the low cost deposits and long duration asset books are important."
"Going forward, we would see that the competition for low cost deposit to rise and outside this merger, even some of the other deals that has happened in this financial space also shows that the long duration asset like mortgages are there and also the companies are focusing on high yielding short-term businesses like credit cards, and something like wealth management."
(Edited by : Akanksha Upadhyay)
First Published: IST