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The board of HDFC Ltd. and HDFC Bank on Friday, June 30, 2023, approved the merger of HDFC Ltd. into HDFC Bank. The record date has been set as Thursday – July 13, 2023, to make the database of the shareholders of HDFC Ltd. to whom shares or HDFC Bank will be allotted.
Therefore, from Thursday – Jul 13, 2023, no one will not be able to trade HDFC Ltd shares even if they own them. In fact, HDFC Ltd shares will NOT show in anyone’s Demat account on and from Thursday, Jul 13, 2023.
Even though the details are now clear by the time I am writing this post there are a few points that may help you if you read this article. If you are reading it post the merger, this post will still help you in future if the same situation happens. So do read.
If you have not read the declaration by HDFC Limited you can read it here:
Here are a few things that you can do if you own HDFC Ltd shares:
The most basic point is this:
Shareholders of HDFC Ltd. will receive 42 shares of HDFC Bank for every 25 shares held of HDFC Ltd. But it will take more than a month for the credit of shares to take place.
So my opinion is simple. Why get into an unnecessary hassle of waiting? Just sell HDFC Ltd Shares before Thursday, Jul 13, 2023, and book the profits – if you are in profit. Or if not, just sell and buy HDFC Bank shares when all the amount is credited to your Demat account in T+1 day.
In the 1 interim day HDFC Bank shares may fall or may rise – does it matter? It will be max 2-3% here or there, that’s it. So instead of the market makers doing the job of giving you the shares, you do it on your own and escape the hassle.
What if you hold HDFC Ltd. F&O contracts?
The existing F&O contracts of expiry months July 2023, August 2023, and September 2023 will expire on Wednesday, July 12, 2023, and shall be physically settled.
Again my advice is the same. Before the expiry date of Wednesday, July 12, 2023 – just close the F&O contract. Do not look at profits or losses. Read the above sentence again – if not closed and if not expired worthless – they will be physically settled.
Not sure if you have gone through the pain of physical settlements of shares, but just to give you an example here it is:
The lot size of HDFC Ltd is 300. The closing price of HDFC Ltd is 2,769.45 (NSE 07-Jul-23).
Now if physically settled you have to keep this amount ready (either to buy its shares or go for a penalty of not being able to deliver the shares. Please note that not being able to deliver the shares is even more painful as you will have to buy from the auction market which is at least 10% above the closing prices):
2,769.45 * 300 = 8,30,835.00 (Eight Lakhs 30 Thousand and 835).
So closing the options or futures trades of HDFC Ltd before Wednesday, July 12, 2023, is more important than selling the shares and buying HDFC Bank shares.
I pray to the almighty that no one gets into a physical settlement of shares. All I can do is teach people via my website – TheOptionCourse.com or via my emails. It is up to you to listen or not.
My financial management advice is simple – KISS – Keep It Simple Stupid.
In fact whoever made this proverb or whatever it is called. Kodos to him/her.
Keep It Simple Stupid (KISS) works not just in financial markets but in life as well. Just live below your means. Keep things simple not flashy and wear simple clothes – not branded extravagance ones, and you will save more than 10% of your salary compared to what you are saving now every month.
I hope you read this post till here and will implement what you learned, to improve your financials and life.
Update on 10-Jul-23:
Someone said in the comments section – “I also read somewhere that if you own less than 25 shares of HDFC, then you won’t get HDFC Bank shares in proportion, so I sold my HDFC shares.”
So I am writing some more updates on this topic.
What will be the average price for allotted shares of HDFC Bank?
The average price of allotted HDFC Bank shares will be calculated as follows: Invested value in HDFC Ltd. / The number of HDFC Bank shares received including fractional shares.
For example, if you had invested in 25 shares of HDFC Ltd. at Rs. 2500, the invested value will be Rs. 62,500.
If you receive 42 shares of HDFC Bank, the average price will be Rs. 1488.09 (62,500 / 42).
The fractional shares are cash settled, and the amount for these will be directly credited to your primary bank account as and when the trustee appointed by the company sells the shares.
When will I receive the amount for fractional entitlement?
If there is any fractional entitlement, the equivalent amount will be directly credited to your primary bank account after the trustee appointed by the company sells the shares. I think this will take 30 days approx.
What if I hold less than 25 shares of HDFC Ltd.?
Even if you hold less than 25 shares of HDFC Ltd., you will receive an allotment of HDFC Bank shares. For example, if you hold 10 shares of HDFC Ltd., your allotment comes to 16.8 shares (42 / 25 = 1.68 x 10 = 16.8). 16 shares will be credited to your demat account. 0.8 will be fractional and the amount for this will be credited to your primary bank account.
Update on 11-Jul-23:
By selling HDFC Ltd. shares and buying HDFC Bank Ltd. shares you will not lose anything. Here is the calculation:
Prices as of 12.57 pm 11-Jul-23:
HDFC Ltd: 2,783 * 25 = 69,575.00
HDFC Bank Ltd: 1670 * 42 = 70,140.00
As you can see the difference is just 70,140.00 – 69,575.00 = 565
So just avoid that unnecessary hassle.
If you have any more questions please ask in the comments section.
Some ideas to write this post are taken from tradingqna of ZERODHA.
Update on 13-Jul-23:
This is not a tip or advisory service, but post-merger of HDFC into HDFC Bank – which has already happened – HDFC Bank will become a financial powerhouse. It already was the largest private-sector bank in terms of customer size, loans and reach.
Now all the customers of HDFC will become customers of HDFC Bank. Once everything will finalize – it takes time – the market capitalisation of HDFC Bank will be Rs 14 lakh crore. This is mammoth.
The full picture is not clear yet but I feel this is a great time to collect some HDFC Bank stocks and sit tight for at least 20% up move.
Disclaimer: This is NOT an advisory service. I have just shared my thoughts in this post. Kindly do thorough research before investing.
Here are a few links that will help you to do some research on HDFC Bank Ltd. company. Decide to invest or not after reading:
Here is the balance sheet of HDFC Bank:
Profit and Loss:
Interest Earned, Expenditure and EPS :
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