One of the big reasons why HDFC Bank’s ADR always traded at a significant premium was because of the foreign investors limit (74% for an Indian private bank) which was are already hit.
As the large foreign fund managers (pension funds, sovereign wealth funds, municipal corporations etc) need to invest big money in a high quality franchise like HDFC Bank, the limit was acting as a big hurdle, they were never getting the required volumes and availability itself was an issue, hence the ADR always traded at 15-30% premium for HDFC Bank. The merger has obviously played a spoil sport to this and the fact that ICICI, Axis are back to good days, constant FII/FPI selling has sent HDFC Bank’s foreign investor limit well below 74%, so there is enough room for foreign investors to allocate fresh money in HDFC Bank.
As per the Dec 2023 shareholding pattern, foreign investors still have 21% legroom to get to hit the limit of 74% in HDFC Bank. 21% legroom left at a ~$100bn base is $20bn. So, paying up 15-30% premium for the ADR makes little sense.
For that matter, from the random google searches I did on other Indian companies, ADRs generally trade at discount for other companies
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