Nifty scales 18,000 mark; HDFC twins rally on merger update

Equity indices surged in morning trade, supported by a rally in HDFC twins post merger announcement. The Nifty scaled the crucial 18,000 mark.

At 10:25 IST, the barometer index, S&P BSE Sensex surged 1,496.69 points or 2.52% at 60,773.89. The Nifty 50 index gained 392.55 points or 2.22% at 18,063.25.

In broader market, the S&P BSE Mid-Cap index added 0.78% while the S&P BSE Small-Cap index rose 1.15%.

The market breadth, indicating the overall health of the market, was strong. On the BSE, shares 2,519 rose and 674 shares fell. A total of 149 shares were unchanged.

Foreign portfolio investors (FPIs) bought shares worth Rs 1,909.78 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 183.79 crore in the Indian equity market on 1 April, provisional data showed.

Economy:

On the macro front, India`s merchandise exports spurt to a record high of $418 billion in the 2021-22 fiscal on higher shipments of petroleum products, engineering goods, gem and jewellery and chemicals, according to official data released on Sunday.

India`s annual median GDP growth forecast stood at 7.4% for 2022-23, according to a survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) released on April 3. The Economic Outlook Survey estimates a minimum and maximum growth of 6% and 7.8%, respectively.

Buzzing Index:

The Nifty Bank index jumped 1,532 points or 4.13% to 38,681.25. The index has surged 9.2% in six days.

Bandhan Bank (up 2.19%), Kotak Mahindra Bank (up 1.19%), IDFC First Bank (up 0.96%), RBL Bank (up 0.91%) and AU Small Finance Bank (up 0.59%) were top gainers in banking space.

HDFC, HDFC Bank Merger:

Shares of HDFC jumped 14.89%to Rs 2,815.9 while HDFC Bank rallied 13.92% to Rs 1,716 after the banking behemoths announced merger.

The board of Housing Development Finance Corporation (HDFC) on Monday (4th April) approved a composite scheme of amalgamation of HDFC into HDFC Bank, and their respective shareholders and creditors. The subsidiaries and associates of HDFC will shift to HDFC Bank.

Shareholders of HDFC as on the record date will receive 42 shares of HDFC Bank (each of face value of Re 1), for 25 shares held in HDFC (each of face value of Rs 2), and the equity share(s) held by HDFC in HDFC Bank will be extinguished as per the Scheme.

As a result of this, upon the Scheme becoming effective, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.

"The proposed transaction is to create a large balance sheet and net-worth that would allow greater flow of credit into the economy. It will also enable underwriting of larger ticket loans, including infrastructure loans -- an urgent need of the country," HDFC said in a statement.

As of 31 December 2021, HDFC Bank`s total advances stood at Rs 12,68,863 crore and HDFC`s total advances stood at Rs 5,25,806 crore. Post merger, pro forma total advances of the combined entity is expected to be Rs 17,86,669 crore.

The proposed transaction will result in reducing HDFC Bank`s proportion of exposure to unsecured loans. The merger is expected to result in bolstering the capital base and bringing in resiliency in the balance sheet of HDFC Bank.

Post the combination, HDFC Bank`s customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights through-out the customer life-cycle. This will result in an enhanced value proposition and customer experience for all customers of the combined entity.

The boards of HDFC and HDFC Bank believe that the merger will create long-term value for all stakeholders, including customers, employees and shareholders of both entities. The amalgamation of the two entities will provide further impetus to the Government`s vision of �Housing for All�.

The merger is expected to close within 18 months (Q2 / Q3 FY24), subject to completion of regulatory approvals and other customary closing conditions. HDFC had total assets of Rs 6,23,420.03 crore, turnover Rs 35,681.74 crore and net worth of Rs 1,15,400.48 crore as on 31 December 2021. Meanwhilre, HDFC Bank had total assets Rs 19,38,285.95 crore, turnover of Rs 1,16,177.23 crore (includes other income) and net worth of Rs 2,23,394 crore, as on 31 December 2021. HDFC Investments and HDFC Holdings are wholly-owned unlisted subsidiaries of HDFC. These two firms are non-banking finance companies, registered with RBI, engaged in the business of investments in stocks, shares, debentures and other securities.

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