HDFC Bank and HDFC Ltd have already started to operate as a merged entity. Meanwhile, the company’s board has fixed July 13 as the record date for determining which shareholders of HDFC Ltd are entitled to receive HDFC Bank’s shares. Thereafter, HDFC Ltd will be delisted from the bourses and the merged companies will most likely start trading as a combined entity on July 17, 2023.
Mergers and acquisitions may result in fractional shares, or entitlements of a share less than one unit. This usually happens when companies are using a predetermined share-swap ratio.
In the case of HDFC’s merger with HDFC Bank, the share swap ratio is such that shareholders will receive 42 fully paid-up shares of HDFC Bank for every 25 shares that they hold in HDFC Ltd. To be eligible to receive these shares, they must have HDFC’s shares in their demat account as on the record date, i.e., as on July 13. This in turn means that they will have to buy the shares on or before July 12, as the settlement takes two days (T+1).
Let’s say that a shareholder holds 15 shares of HDFC. They will be eligible to receive 25.2 shares of HDFC Bank. In this case, the investor will likely receive 25 shares of HDFC Bank and the remaining 0.2 shares will likely be paid in cash, at the market price decided by the company.
HDFC Bank’s shares closed at ₹ 1725.00 apiece on Tuesday. It has a market capitalization of 9,61,676 crores and is a large-cap company. It has an ideal return on equity of 17.14% and a dividend yield of 1.10%. Its shares were trading at a price-to-earnings ratio of 20.90, which is higher than the industry P/E of 9.04, indicating that the stock might be overvalued as compared to its peers.
Foreign institutions hold a 32.22% stake in the company followed by promoters with 25.59%, mutual funds with 18.47%, retail investors with 15.65% and other domestic institutions with 8.07%.
Written By Simran Bafna
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