Today’s share price is roughly same as the pre-merger price of Rs.1650 odd. Before the merger, HDFC Ltd held 25 % stake in HDFC Bank. So, the valuation of HDFC Ltd included the value of its holdings in HDFC Bank, which we can say was Rs.2.5 lac crore. That leaves the value of HDFC Ltd (ex-HDFC Bank) to Rs.2.7 lac crore. Add that to Rs.10 lac crore and you are at Rs. 12.7 lac crore, close to today’s valuation at an aggregate level.
But there is equity dilution to the extent of 35 %. To adjust to that, value of each share should be marked down by 25 %. (If 100 shares become 135, share price will adjust downwards by 25 % approx.)
Thirdly, HDFC Ltd was a worse business than HDFC Bank, so the merged entity will get lower discounting than before.
When you adjust to all this, today’s per share price should be much below pre-merger price of Rs.1650-odd. But then the broader market rally and the bank’s growth last one year helps it push up back to Rs.1650 perhaps. Today’s price doesn’t seem out of place.
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