Bandhan Bank - Gruh Finance merger: This NBFC is the biggest gainer with this deal

A new merger has become the talk of town now, and this time it is the coalition of two forces. Chandra Shekhar Ghosh-led Bandhan Bank will merge with one of the NBFC major Gruh Finance. While Bandhan and Gruh are deciding their future course, it would be NBFC-giant Housing Development Finance Corporation (HDFC) who is seen to gain the most from this deal. Bandhan Bank entered the stock market world just last year and has emerged as the seventh largest bank in terms of market price. One can expect that this merger with Gruh Finance, is an attempt of Bandhan Bank to trim down its promoters stake in order to meet RBI’s guidelines.

The deal will take place as a share swap ratio, where for every 1,000 shares of GRHF shareholders will get 568 shares of Bandhan. In Motilal Oswal’s view, this is at an ~8% discount to the closing price of GRHF as of 7 Jan’19 and at a ~2.5% premium to the last six months average price. 

Notably, analysts at Motilal Oswal highlighted that, Gruh - Bandhan merger will be a big win for HDFC. The Mumbai-based NBFC incrementally has been increasing share of affordable housing both in volume and value terms.

'There has been an overlap in the business of both GRHF and HDFC Ltd, especially in the western region. HDFC could monetize its investment in GRHF at a very attractive valuation (13.3x Trailing BV). Post deal, HDFC Ltd will have ~15% stake in the bank," analysts said.

शेयर बाज़ार में किस्मत का कितना काम?
बाज़ार में निवेश के गुरु मंत्र सीखिए अनिल सिंघवी और स्वाति रैना के साथ #InvestmentGurukul #Episode16 में।

पूरा इंटरव्यू देखिए https://t.co/eJgjkOnS75@AnilSinghviZEE @SwatiRaina6 @ChoiceBroking @sumeetbagadia pic.twitter.com/2CJ1lVk9F6

— Zee Business (@ZeeBusiness) January 8, 2019

“According to regulations, it can own a maximum stake of ~9.9% in another bank (as already shareholder in HDFCB) subject to regulatory approval," they added.

Thereby, if HDFC sells ~5% stake then, Motilal says,  “it can fetch INR40b (based on combined MCAP of INR806b on the deal value).” Currently, on BSE, the share price of HDFC is trading at Rs 1,965.25 per piece sequentially down by 0.26% at around 1049 hours.