How to take this merger of two big financial institutions?
Bandhan bank it self showed a good growth over the years while Gruh finance has good backing of HDFC but why today after the news of merger both shares plunged by 5% ?
Why market took the merger of two big institutions as a negetive news?
RBI had in September placed restrictions on Bandhan Bank for its failure to meet the rules by freezing branch expansion and remuneration of founder and chief executive Chandra Shekhar Ghosh. This merger was motivated by this and bandhan bank seems to have gotten the short end of the stick.
“According to analysts, the swap ratio is unfavourable for Gruh Finance given its 73.30 crore paid up capital its valuations with the swap ratio comes out to around Rs 20800 crore or 7% lower from its Monday’s closing market capitalisation of Rs 22436 crore on BSE.”
For Gruh finance -
“Ironically, one of the reasons Gruh Finance enjoys such a high valuation is on account of its parentage. Housing Development Finance Corp. Ltd (HDFC) owns 57.8% in the company. With the deal, Gruh Finance will actually lose this exalted status; although Bandhan Bank has ended up buying the whole company at high valuations.”
Check out these articles -
One follow-up question. What gonna happen if I buy Gruh Finance now? Both of the shares (gruh and bandhan) are still trading on exchange.
I have a query on the relative prices of Gruh and Bandhan.
Since the merger ratio has been fixed, most regulatory approvals received, the prices should move in tandem right? Every rupee change in Bandhan prices should lead to approx 60 p change in Gruh (basis swap ratio). However, I have noticed numerous times that the prices move in opposite directions. e.g. today. Bandhan is up .80% while Gruh is down 1.45%.
What is the logic here? Shouldn’t Gruh’s price be about 342 considering Bandhan’s price of 600+?
@Shivam_Gupta @noid @P.A.W Time value of money invested plus market behaviour risk play an important role in such arbitrage … still there is no record date for merger and after record date the shareholders of erstwhile GF will be in no trading zone for about 8-10 days till listing of new shares of BB.
other than this ,there are 8-10 other live cases of merger in market .
I agree, there are no timelines yet. However, most of the regulatory approvals have already been received. Swap ratio has been finalized long ago. Shareholder’s meeting has been called on June 4 to “discuss” the merger and the result of that is a foregone conclusion since HDFC Bank has enough voting power. If I were to ignore the time value of money, then is this a clear case of arbitrage with an upside of 10%? (hypothetically, assuming I have excess liquidity and a low risk appetite)
Which ones are you talking about? Would they have a bearing on this merger? 
May not be low risk considering in 90% cases such mergers or d -mergers do not turn out rewarding at least in short to medium term . based on my past experience of many many such cases i can say that it is advantageous to sell during the euphoria of the so called value unlocking. it is a very common process in market and as i said there are 8-10 cases of MERGER and 15-17 cases of d-merger live in market .
Has anyone holding Gruh Finance share on the merger date (XX Jan’2019) received Bandhan Bank share as per the 568-1000 share swap ratio?