The government on Monday proposed the merger of three state-owned banks, namely Vijaya Bank, Bank of Baroda and Dena Bank.
Market expert SP Tulsian, from sptulsian.com, spoke to CNBC-TV18 about the proposed merger and his views on the lenders.
“Market will definitely be having its own apprehensions but I don’t see any problem in this move, in fact this is an excellent move. The only worry is that the prompt corrective action (PCA) needs to be taken in respect to 11 banks, only one bank has been chosen from that lot and that is Dena Bank,” he said.
“There is no reason for the 21 public sector undertaking (PSU) banks to exist. We have seen that reduction from 26-25 banks to about 21 with five State Bank of India (SBI) associates having got merged, this is an excellent move and this process will continue in the time to come by the government as well,” Tulsian said.
“Making a ballpark calculation, I am taking a swap ratio of two shares of Vijaya Bank getting one share of Bank of Baroda and maybe 7.5 shares of Dena Bank getting one share of Bank of Baroda. The advantage with both the shareholders of Vijay Bank and Dena Bank is that they will be moving into - both are non-F&O shares – the F&O. non-F&O shares also has a discounting premium pending this amalgamation, so in fact I will be very apprehensive in taking a valuation call on Dena Bank and if I would have been the investor, probably I would have booked my profits at the upper circuit today and I don’t advice – in many of these remaining 9 PCA banks we are seeing many of them up by about 4-6 percent, which in my view is a futile and maybe a risky exercise just to extrapolate the trend or riding the exuberance,” said Tulsian.
“Bank of Baroda is a buy,” he added.
Have you signed up for Primo, our daily newsletter? It has all the stories and data on the market, business, economy and tech that you need to know.