You are right on most of the counts, but why should it get rerated? If it is no longer the same entity, investors should not expect the same multiple as before. That seems to be the collective wisdom of the market. My observation of last so many years is that the Mr. Market is generally right in pricing assets. Mispricing happens, but it gets corrected in a short period of time. Mispricing is more likely and may prevail for longer periods with smaller, less tracked, less liquid kind of stocks than with bigger ones due to technical factors. With a bank like HDFC Bank - literally the torchbearer of the India story - it is impossible that the market will misprice the asset for a year.
I don’t think it has anything to do with the pandemic. The chatter around HDFC Ltd - HDFC Bank merger has been around for a long time, may be for 10 years or more. But nothing came out of it. It had to wait for one particular event to take place, for the merger to move ahead. Once you identify the event, is will be easy to connect the dots. Think.
(Disc.: No positions)
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