HDFC Bank shares drop after Nomura downgrades following merger

India’s largest private sector bank, HDFC Bank Ltd., experienced a significant fall in its share value this Wednesday. The bank’s shares dropped as much as 4.2%, marking the bank as the weakest performer on the NIFTY 50 Index for the day. This steep decline follows a downgrade by Nomura Holdings (NYSE:) Inc., which was prompted by a revision in the bank’s business valuation post its merger with parent company, HDFC Ltd., in July.

This downgrade marks the first for HDFC Bank since its merger and has led to a cumulative decrease of 6% in the bank’s shares over two trading sessions. Analysts at Nomura, headed by Param Subramanian, have raised concerns regarding the bank’s return on assets and potential pressure on loan growth over the next year.

In July, in an attempt to diversify beyond traditional banking products, HDFC Bank merged with HDFC Ltd. However, during a recent analysts’ presentation, the bank disclosed a significant reduction in its parent company’s business valuation. As of July, HDFC Ltd.’s net worth was valued at 1.12 trillion rupees ($13.5 billion), approximately 16% lower than the figure reported in March.

HDFC Bank attributed this adjustment to valuation based on Indian GAAP accounting rules and specific merger-related compliances. Despite these recent events, HDFC Bank still maintains 44 buy ratings and three hold ratings, with no sell ratings according to available data.

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