HDFC Stock Biography: From No Takers in IPO to $40 Billion Merger with HDFC Bank
HDFC, or Housing Development Finance Corporation, has come a long way since its initial public offering (IPO) in 1978. Back then, the issue was undersubscribed, and the stock even listed below its issue price. However, fast forward to the present day, and HDFC has become one of the top 10 most valuable companies in India.
The growth of HDFC stock over the last three decades has been nothing short of remarkable. From a mere Rs 7 in 1992, its value has skyrocketed to become a four-digit stock. Earlier this month, HDFC shares reached a lifetime high of Rs 2,926, with its market capitalization swelling to over Rs 5 lakh crore.
What fueled this stellar growth? One key factor was HDFC’s aggressive expansion plans. Originally just a retail home loan company, HDFC diversified its offerings and forayed into banking in 1995. This move gave birth to HDFC Bank, which has since become one of the top 5 banks in India, with 7,280 branches across the country.
Unlike its parent company, HDFC Bank’s IPO received an overwhelming response on Dalal Street in 1995. The issue was subscribed a whopping 53 times, and since then, the stock value has surged to over Rs 1,700 from a mere Rs 4.
Recognizing HDFC Bank’s strong growth and market position, HDFC decided that it was time for the bank to take the lead in the next phase of growth. As a result, a reverse merger was announced, which came into effect on July 1. This merger has made HDFC Bank the fourth-largest bank in the world by market capitalization.
The $40 billion merger is a significant milestone for both HDFC and HDFC Bank. Shares of HDFC will be last traded on July 12, and the record date for eligible shareholders for the allotment of HDFC Bank’s shares is set for July 13.
The implications of this merger are substantial. In India, HDFC Bank will overtake Reliance Industries to become the largest firm by market capitalization. Additionally, it will become the single largest stock by weightage on Nifty 50. Unlike Reliance Industries, HDFC Bank is fully-owned by the public, making its free float the highest amongst all listed stocks.
With HDFC bidding adieu to Dalal Street, it now looks forward to the next phase of growth under HDFC Bank’s umbrella. The reverse merger not only solidifies HDFC Bank’s position as a global banking giant but also opens up new opportunities for expansion and development.
As HDFC continues its journey, it is essential to acknowledge the vision and perseverance of its founders, HT Parekh and Deepak Parekh. Their foresight and drive have propelled HDFC to its current status as a market leader and a powerhouse in the Indian banking sector.
The future looks promising for HDFC Bank, with plenty of room for further growth in valuation multiples. At present, the bank trades at 16x one-year forward EPS, which is 20% below the 15-year mean average. This indicates that there is still potential for an expansion in valuation multiples.
As investors and market participants eagerly watch the developments surrounding the merger and HDFC Bank’s future, it is clear that HDFC’s journey from having no takers in its IPO to this $40 billion merger is a testament to resilience, perseverance, and strategic vision. The story of HDFC is an inspiration for all aspiring companies aiming to achieve success and growth in the Indian market and beyond.
