Last week, India’s largest housing financier announced a merger with India’s largest private sector bank paving the way for tapping into potential synergies in the HDFC Group and further pushing a path for creating a banking behemoth which will enable larger scale of lending. For investors, this could potentially prove to be a mixed bag with lower margin and lower risk mortgage finance business merging into HDFC Bank. The day of the announcement saw the stock of HDFC Bank surge over 10%. The Group announced the merger ratio, which now provides medium to long investors with an opportunity of purchasing HDFC Limited shares which will potentially convert into the shares of HDFC Bank. Based on the conversion ratio, there is a potential benefit of 3.5% if such method is employed. Hersh Sayta gives us the analysis.
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