HDFC Bank enters $100 billion m-cap club, but fails to pip TCS as number 2 stock

HDFC Bank, the largest private lender in the country, has achieved a new milestone of entering the $100 billion market-capitalisation club after its reverse merger with its parent HDFC Ltd.

However, on the Indian bourses, HDFC Bank still lags behind oil-to-telecom conglomerate Reliance Industries (RIL) and IT major Tata Consultancy Services (TCS), sitting on the third position with a market cap of ₹12.43 lakh crore. 

The m-cap of RIL is over ₹18.85 lakh crore, while that of TCS is around ₹12.94 lakh crore.

With a market value of over $151 billion, HDFC Bank is now the world’s seventh largest lender. It has grown bigger than Morgan Stanley, Goldman Sachs and Bank of China, according to data on companiesmarketcap.com.

In the list of biggest banks in the world as per market capitalisation, HDFC Bank is just behind JPMorgan, Bank of America, China's ICBC, Agricultural Bank of China, Wells Fargo and HSBC, companiesmarketcap.com data showed.

Also Read: HDFC Bank Q1 Result: HDFC Bank Q1 net profit rises 30% YoY to ₹11,952 crore; NII jumps 21%

On July 13, shares of mortgage lender Housing Development Finance Corporation (HDFC) got delisted from Indian bourses after its $40 billion worth reverse merger deal with HDFC Bank.

As per the share exchange ratio of the merger, for every 25 shares of HDFC, 42 shares of HDFC Bank were issued to the former’s shareholders. 

Meanwhile, TCS share price has seen a sharp rally in the last week after the IT giant announced its June quarter results.

TCS stock price rallied nearly 8% in the last one week, taking its market capitalization to above ₹12.8 lakh crore on Friday.

On the other hand, analysts believe HDFC Bank shares can see more upside after the merger.

Expert Views on HDFC Bank Stock

JPMorgan assigned an 'overweight' rating on the stock, pegging the target price at ₹2,000, citing the merger of HDFC with HDFC Bank is positive from a medium-term perspective.

"We believe the merger with parent HDFC is positive from a medium-term perspective, given the opportunity for liability refinancing, cross-sell, addition of book duration and lower share of unsecured loans," said JPMorgan in a report on July 11.

Earlier, Morgan Stanley had also maintained an 'overweight' rating on the stock with a target price of ₹2,110.

According to the brokerage, the merger between HDFC and HDFC Bank is synergistic. It said that HDFC Bank has access to a sizable customer base as well as secured and extended tenor retail mortgage products. Its product offering, together with direct access to insurance and other services, is superior to that of the majority of private banks, as is its geographic reach.

Santosh Meena, Head of Research, Swastika Investmart Ltd believes the merger is expected to bring about a host of positive benefits for HDFC Bank.

“This strategic move will likely enhance the bank's scale, reach, and overall competitiveness in the market. As a result, investors can expect to reap the rewards of this consolidation, as HDFC Bank expands its offerings and taps into new growth opportunities,” Meena said.

Considering these factors, he advises investors to stay invested in HDFC Bank, a quality giant in the banking sector. 

“With its proven track record, resilience, and potential benefits of the merger, HDFC Bank continues to demonstrate its ability to generate long-term value for shareholders,” he added.

On Monday, the shares of HDFC Bank ended 2.07% higher at ₹1,679.20 apiece on the BSE.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.