HDFC Bank DHFC merger: After HDFC twins merger, a good number of equity mutual funds will have more than 10 per cent stock exposure in HDFC Bank shares. The equity mutual fund schemes include Invesco India Tax Plan, Bandhan Large Cap Fund, Tata Equity P/E Fund, Sundaram Large Cap Fund, etc. However, as per the SEBI rule, one mutual fund scheme can’t have more than 10 per cent exposure in one stock. So, due to this HDFC twins merger, SEBI has a task to look at as overnight stake selling may lead to artificial downside in HDFC Bank share price.
SEBI rules and regulations for mutual funds
Speaking on SEBI rules for mutual funds, Pankaj Mathpal, MD & CEO at Optima Money Managers said, “Under current SEBI rules and regulations for mutual funds, all equity mutual funds having exposure of over 10 per cent in HDFC Bank shares after the HDFC twins merger, they will have to cut down their stake in the stock up to 10 per cent within 30 days.”
On HDFC Bank HDFC merger and the options that SEBI has in regard to equity mutual funds, Kartik Jhaveri, Director — Wealth at Transcend Capital said, “SEBI rule says that one mutual fund scheme can’t have more than 10 per cent stake in one stock. However, under certain circumstances, SEBI allows some relaxations as well. Here in the case of HDFC twins merger, SEBI may give some relaxation by giving a time line within which mutual funds will have to curtail their exposure in HDFC Bank after the merger of HDFC Ltd.”
On why SEBI should give a timeline in stead of overnight selling, SEBI registered investment expert Jitendra Solanki said, “Sometimes, mutual funds’ exposure in a stock goes beyond 10 per cent due to appreciation of the stock as well. In that case, SEBI asks mutual funds to trim their exposure in a given time. Here, mutual funds exposure in HDFC Bank has risen due to both HDFC Bank and HDFC Ltd share price appreciation and HDFC twins merger. So, SEBI needs to take care of both scenario. Asking mutual funds to but down stake immediately may lead to artificial downside in HDFC Bank shares though fundamentals of the stock has become very strong after merger HDFC Ltd. So, SEBI must be aware of this and hence I am expecting the cut down of exposure in a given time frame.”
However, Kartik Jhaveri of Transcend Capital said that SEBI may allow mutual funds to continue holding above 10 per cent stake with some terms and conditions as it has the right to relax its rules under certain circumstances. He advised retail HDFC Bank shareholders to remain vigilant about the next move of SEBI in regard to mutual funds exposure going above 10 per cent after the HDFC Bank HDFC merger.
HDFC twins merger
HDFC Bank and HDFC Ltd announced successful merger last week, which became effective from 1st July 2023. The merged entity inter-alia brings together significant complementarities that exist between both the entities and is poised to create meaningful value for various stakeholders, including respective customers, employees, and shareholders of both the entities from increased scale, comprehensive product offering, balance sheet resiliency and ability to drive synergies across revenue opportunities, operating efficiencies and underwriting efficiencies. Pursuant to the share exchange ratio as per the merger scheme, HDFC Bank will issue and allot to eligible shareholders 42 new equity shares of the face value of Re. 1/- each, credited as fully paid-up, for every 25 equity shares of the face value of Rs. 2/- each fully paid-up held by such shareholder in HDFC Ltd. as on the Record Date i.e., July 13, 2023.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 03 Jul 2023, 10:54 AM IST
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