Analysts suggest buying HDFC Bank shares on every dip as merger to strengthen housing loan portfolio

• HDFC and HDFC Bank announced a merger, bringing the housing finance company under the wings of HDFC Bank.
• Analysts believe this is a marriage made in heaven and they expect the merger to be a game changer.
• They recommend buying HDFC Bank on every dip as the proposed merger will strengthen its housing loan portfolio.

Today, two of India’s largest companies are merging to create a strong entity that will be a game changer in the market. HDFC and HDFC Bank are to merge, bringing the housing finance company under the wings of HDFC Bank.

Not only investors but analysts also believe in the marriage of these two large companies and recommend investing on every dip. Shareholders of the HDFC group companies have grown richer by over ₹1 lakh crore post the merger news.

Analysts believe that this is a marriage made in heaven and they expect the merger to be a game-changer.

“This merger will help expand the customer base and build a product portfolio in the housing loan category. We expect a great future ahead for this giant and this merger might be a game-changer in their segment. Recommend to buy this stock and accumulate it on dips,” said Manoj Dalmia, founder and director at Proficient equities.
While the merger is beneficial to both the companies, for HDFC Bank it is making the home loan portfolio larger and stronger.

“HDFC Bank reported loan growth of 21% year-on-year and retail deposit growth is healthy. The operating profits may also see a surge on strong commercial banking and corporate segments. The merger of HDFC Bank and HDFC is a complement to the investors and a value addition to HDFC Bank,” said Dr. Ravi Singh, vice president and head of research at Share india.

While the merger is announced, the regulatory approvals could take up to 18 months to complete.

HDFC Chairman, Deepak Parekh reportedly said that post effective date of merger, all HDFC branches will continue to offer mortgages. Later HDFC branches may be converted into bank branches. He believes the banking industry is well positioned to grow.

“For HDFC the biggest gain will be access to well-diversified low-cost funding and a huge customer base of HDFC Bank Ltd …The proposed merger will enable HDFC Bank to build its housing loan portfolio. The housing loan market is at the cusp of a strong up-cycle along with tailwinds for the real estate sector, and it provides a steady secured asset class with very attractive risk-adjusted returns. This will increase the balance sheet size of the merged entity enabling it to underwrite large ticket size loans,” said Santosh Meena, head of research, at Swastika Investmart.


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