As the reverse merger of Housing Development Finance Corporation (HDFC) with HDFC Bank completed, the investability weight of the private lender grew to 1.52% from 0.81%. Index aggregator FTSE Russell said the weightage would be implemented across three tranches by March 2024.
The first tranche is set to be applied in the September index review, the second tranche will occur during the index aggregator’s December review and lastly, the third tranche will go into effect in March 2024, said FTSE. The index aggregator added, “FTSE Russell has considered client feedback on the significant size of the projected upweight and the potential impact to the company’s foreign headroom, if the shares in issue and free float update are implemented in their entirety on a one-off basis at the September review.”
During the September review, FTSE will assess the eligibility of HDFC Bank by evaluating its free float, foreign headroom and shares in issue. “Consequently, to ensure the replicability of the impacted indices, FTSE Russell proposes to implement the upweight of HDFC Bank in three tranches …, with the December and March tranches contingent on the company’s foreign headroom continuing to satisfy the minimum 10% headroom requirement,” said FTSE. In the September trance, the shares in issue will be 754.49 crore, with a 74% investability weight and 18.3% foreign headroom.
Earlier last month, HDFC Bank replaced shares of HDFC in the FTSE Global Equity indices as the mortgage lender’s shares were delisted. The aggregator said it will review the eligibility criteria of the replacement in the next quarterly review meeting.
In a report, Nuvama Institutional Equities said that FTSE is likely to combine the original HDFC Bank shares in the case that there is sufficient liquidity, no foreign ownership restriction, and at least 10% foreign headroom is available (which is currently the case). “This could lead to a potential weight increase of around $1.5 billion. The announcement of any changes will be made on August 18, 2023 and adjustment will take place on September 15,” added the brokerage.