What’s should be your strategy for primary market in FY25?
How many companies can have IPO in the financial year 2024-25? How much money can companies raise from the primary market in FY25? What should be the strategy in primary market in FY25?
Japanese brokerage firm Nomura sees up to 30% upside in the country’s largest lender State Bank of India (SBI) and leading private sector lender HDFC Bank. The brokerage has fixed a target price of Rs 1,690 for HDFC Bank while it has set a target price of Rs 550 for SBI, indicating an upside of 30% from the current market price.
HDFC Bank
HDFC Bank recently announced that it plans to acquire 4.99% of HDFC ERGO General Insurance Company from its parent company, HDFC Limited, for Rs 1900 crore, which pegs the market capitalisation of HDFC ERGO at Rs 38,200 crore, or Rs 536 per share.
The deal was struck at the same valuation when HDFC Limited had sold a 0.62% HDFC ERGO stake to ERGO International (JV partner) to meet RBI norms of keeping its outstanding stake at 50% or lower, in HDFC ERGO. The premium market share for HDFC ERGO (including Apollo Munich) has remained broadly flat at 6.2-6.4% in last three years.
“We understand, the stake purchase is a financial investment. HDFC Bank may be looking to encash when HDFC ERGO goes for an IPO at some point in the future or offloads the stake to an interested third party for a premium. Rs 1,900 crore is also not a lot of money – it’s about 20 basis points of capital. So it could be thought of as aggressive deal chase for making a quick gain over the medium term by HDFC Bank,” Nomura said in a report.
State Bank of India
On the other hand, the debts recovery tribunal (DRT) has sold shares worth over Rs 5,800 crore of United Breweries Limited (UBL) that were earlier attached under the anti-money laundering law as part of an alleged bank fraud probe against fugitive liquor baron Vijay Mallya, the Enforcement Directorate said on Wednesday.
The further realisation of Rs 800 crore by sale of shares is expected by June 25, the central probe agency said in a statement.
Recently, it said, the agency had transferred shares attached by it (worth about Rs 6,600 crore) to the SBI-led consortium as per the order of the special Prevention of Money Laundering Act (PMLA) Mumbai. “Today, DRT on behalf of SBI-led consortium has sold shares of United Breweries Limited for Rs 5824.50 crore,” the ED said.
“Additional recovery may have a positive impact on FY22 earnings or put differently, provide additional cushion to any asset quality worries owing to the second wave. We make no change to our estimates and target price for SBI,” Nomura said.