With Housing Development Finance Corporation’s (HDFC’s) merger with HDFC Bank becoming effective on July 1, the merged entity is set to become the top weight in the benchmarks S&P BSE Sensex and the NSE Nifty, a report by Business Standard highlighted. The merged entity will overtake the country’s most valuable company, Reliance Industries (RIL), from its perch, it further pointed out.
HDFC will stop trading after July 13.
Currently, RIL has a weighting of close to 12 percent in the Sensex and 10.3 percent in the broad-based Nifty. Meanwhile, HDFC Bank and HDFC have 9.9 percent and 6.8 percent weightages, respectively, in the Sensex and 8.8 percent and 6 percent in the Nifty, respectively, it said.
On a pro-forma basis, the merged entity will have a weight of 16.7 percent and 14.8 percent in the Sensex and the Nifty, respectively, informed BS.
However, it noted that the merged HDFC Bank’s market capitalisation (m-cap) of ₹14.7 lakh crore is likely to stay below RIL’s, which is valued at ₹17.3 lakh crore, but will overtake Tata Consultancy Services (TCS), which is currently valued at ₹12.1 lakh crore.
As per the BS report, both RIL’s and TCS’ free-float m-caps are lower compared to HDFC Bank’s, hence, the private sector lender will command a much higher weighting.
“After the merger, we estimate passive trackers to own about 11 percent of the company, American depository receipt holders to own 13.7 percent, retail and high net-worth investors to own 10.5 percent, insurance companies to own 8.25 percent and about 55 percent held by active investors,” analyst Brian Freitas, a New Zealand-based analyst with Periscope Analytics, was quoted as saying.
The report further informed that LTIMindtree is likely to be added to the Nifty index and could witness inflows of ₹1,630 crore from passive trackers.
Meanwhile, LTIMindtree could be replaced by either Jindal Steel & Power or TVS Motor in the Nifty Next 50 index, added BS.
