HDFC MCap drops rs50k crore over merger cost news – Times of India

by The Technical Blogs


MUMBAI: Shares of HDFC Bank fell to close 4% lower on Wednesday after the bank revealed in an analyst day presentation that its net worth had taken a Rs 20,000 crore hit due to the merger of HDFC. The Rs 65 drop in the bank’s share price to Rs 1,560 shaved off nearly Rs 50,000 crore from the bank’s market value.
After the presentation, many analysts downgraded their target price for the bank’s stock. The analyst call brought into line the impact of the measures taken by erstwhile HDFC to align its policies to get merger-ready. Besides the hit to the bank’s net worth, HDFC had also seen its margins narrowing as it had to generate a huge amount of liquidity to meet the reserve requirement prescribed for a bank.
“While we were already conservative in our projections, the impact on net worth from the transition to IGAAP, credit policy harmonisation and other factors has led to a slight cut in our book value projections,” said Motilal Oswal in a research report.


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