Shares of HDFC Bank rose nearly 2% to ₹1,462.80 apiece in early trade on Monday. This uptick follows the approval granted by the Reserve Bank of India (RBI) to LIC, allowing it to increase its stake up to 9.99% in the country’s largest private sector bank.
In an exchange filing on Thursday (January 25), HDFC Bank stated that permission was given to LIC with regard to the application submitted to RBI. LIC has been advised by the RBI to acquire the 9.99% shareholding in the bank within a period of one year, by January 24, 2025.
At the end of Q3FY24, LIC held 340,921,284 shares, representing a 5.19% stake in the Bank. The estimated value of this stake, based on the Thursday closing price of the stock, stands at ₹48,836 crore. With this approval, LIC can now buy an additional 4.8% stake.
No penalty will be imposed on LIC if they do not increase their stake to 9.99%. It is not that they must increase their stake to the said limit. However, 9.99% should be the maximum, as experts pointed out.
Mohit Gulati, CIO & Managing Partner of the ITI Growth Opportunities Fund, said this is fantastic news for HDFC stockholders. Although the stock has suffered and is almost at a 52-week low, the company is one of the few private lenders that has endured throughout time. The results were, of course, well below expectations. LIC is unquestionably a sentimental booster, according to Gulati.
Further, Mohit thinks the downside for the stock is somewhere very close right now, so we could see it bounce back.
Adding to this, Arun Kejriwal, founder of Kejriwal Research and Investment Services, highlighted that since this permission is valid for one calendar year, anyone expecting LIC to purchase HDFC Bank tomorrow is not going to be disappointed.
HDFC Bank shares went under pressure after the release of the bank’s Q3 FY24 numbers, falling below the street estimates in deposit and liquidity metrics. The rising cost of funds and tight liquidity have impacted the NIMs.
The bank reported a drop in net interest margin (NIM) on total assets to 3.4% from 3.65% in the previous quarter (Q3 FY23). It’s worth noting that the NIM stood above 4% for the bank before its merger with the parent company, Housing Development Finance Corp. (HDFC).
Between January 16 and January 25, the stock witnessed a significant decline of almost 14.5% in its value. Considering its substantial weightage in both the Nifty 50 and the Nifty Bank, this sharp fall has also influenced the overall market performance.
Source Link: HDFC Bank share price gains 2% after RBI approves LIC's stake acquisition | Mint