Mumbai: The merged HDFC Bank was the most actively traded security in terms of value on the NSE, signalling huge trader interest leading up to the forthcoming earnings call on 17 July, which is likely to determine the stock price trajectory of the entity.
On Thursday, HDFC Bank’s traded value was at ₹3454.98 crore, surpassing ICICI Bank and Reliance Industries Ltd.
On a day of high market volatility, with the Nifty fluctuating 181 points, the HDFC Bank stock ended 0.5% higher at ₹1641.10 apiece. So far in 2023, the HDFC Bank stock underperformed its peers and the 12- member Bank Nifty index, but analysts said it is likely to narrow the gap following its earnings call with investors as well as analysts.
“Investors are keenly awaiting the earnings call for clarity on the transition period, synergy benefits and cost saving,” said Gaurav Dua, senior vice president and head of capital market strategy, Sharekhan by BNP Paribas. “If there is clarity, underperformance could narrow, but in the absence of clarity there will be pressure in the short term. We have a positive rating on the stock.”
While the stock has risen a mere 0.8% year to date, Bank Nifty has risen 3.91% to its closing of 44665.05 on Thursday. Its market capitalization may rise to around ₹12.36 trillion, lower than the ₹18.59 trillion for RIL, once the stocks held by the shareholders of HDFC get listed in another 10-11 days, said Abhilash Pagaria, head of alternative and quantitative research, Nuvama Institutional Equities. However, the weightage of the merged stock at 14.4% will be the highest on the Nifty against RIL’s 10.8%.
The market cap on Thursday was at ₹9.19 trillion.
HDFC shareholders will be allocated 1.68 shares of HDFC Bank for every share they hold. To illustrate, an investor holding 20 shares of HDFC will be granted 33 shares of the combined entity, besides an investment credit of 0.6 in her bank account at the prevailing price. Similarly, an investor with 55 shares will be entitled to get 92 shares of the merged entity, with 0.4 credited to the bank.
Pagaria expects the next trigger for HDFC Bank post the earnings call to be a likely FTSE inclusion in its September review, which could result in inflows of around $1.5bn. FTSE Russell is an index provider whose equity indices are tracked by investors around the world for asset allocations to domestic and global markets.
An inclusion by FTSE indices will be clearer by mid-August, said Pagaria.
The HDFC stock was replaced with LTIMindtree, which closed up 1.6% at ₹4,893.30 apiece. The stock rose from a 52-week low of ₹4,121 on January 23 this year to a 52-week high of ₹5,430 on 5 July, post news of its replacing HDFC on the bellwether index.
LTIMindtree was formed after the merger of L&T Infotech (LTI) and Mindtree and commenced trading on the Indian stock market under its new name in December 2022. The inclusion in the index follows the recent development of both CRISIL and India Ratings reaffirming LTIMindtree’s long-term rating as AAA / Stable.
“LTIM’s 4Q23 print missed sharply on revenues even as margins beat. CC QQ growth of 0.7% was 180bps/150bps below JPMe/consensus, led by delays in deal ramp-ups as well as client decision-making, not unlike larger peers,” said global brokerage JP Morgan post the March quarter results. “LTIM saw weakness in Hitech and Health & Public services (both declined QQ), while it felt headwinds in Banking and Retail/CPG segments as well. All these are expected to impact 1Q24 growth. LTIM hopes to see recovery from 2Q onwards based on contracts won.”
The company reported a consolidated net profit of ₹11,141 million on a revenue of ₹86,910 million.
Pagaria sees LTIM stock cap at ₹5200-5300 apiece.
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Updated: 14 Jul 2023, 12:30 AM IST