India: HDFC Bank, HDFC Limited, Jindal Steel & Power, ICICI Prudential Life Insurance, Axis Bank Ltd, Bajaj Auto Ltd, Wipro Ltd, ICICI Bank Ltd, Oberoi Realty and more

• HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) are looking at a mega-merger where HDFC shareholders will receive 42 shares in HDFCB for every 25 HDFC shares held.
• Regulatory and other approvals are expected to take around 18 months and the merger will create a US$145bn behemoth. Some regulatory approvals could be tougher to get than others.
• HDFC Limited (HDFC IN) is a member of the FTSE All-World and MSCI India indices, while HDFC Bank (HDFCB IN) is not. The index treatment is tricky.

• This is at a time a shocker and at a time, not. Because of rising regulatory requirements for NBFCs, this was to be expected at some point.
• The deal pays Limited shareholders a slight premium vs previous close, but enables them to exit without a holdco discount. 
• Early days yet regulatorily speaking, but accretive, and it makes a lot of sense. It will be appreciated. 

• As of the close on 1 April, we expect Tata Elxsi Ltd (TELX IN) and Jindal Steel & Power (JSP IN) to be included in the MSCI India Index.
• Potential deletions at the May SAIR are HDFC Asset Management Co Ltd (HDFCAMC IN), Indraprastha Gas (IGL IN), Mrf Ltd (MRF IN) and Petronet LNG (PLNG IN). 
• Passive trackers will need to buy between 3-4 days of ADV on the inclusions and sell between 4-16 days of ADV on the deletions.

• Today morning, HDFC Limited (HDFC IN) announced that it would merger with HDFC Bank (HDFCB IN). 
• Investors have been asking the two companies about a possible merger for at least the past decade.
• In this note, we talk about the background for the merger and why now.

• This analyst has historically highlighted many cases of mis-selling by the ICICI Prudential Life Insurance (IPRU IN) and the company has responded by focusing on its improving persistency ratio
• However disclosures reveal that the company has the highest mis-selling, total complaints (per 10,000 policies) and surrender ratio as compared to  the top 6 life insurance companies
• IRDAI and IPru Life’s board of directors remains unconcerned about the company’s status as a leader in mis-selling and in surrender ratios. Shareholders need not share this apathy.

• Axis Bank announced the acquisition of Citibank’s cards, consumer lending, and wealth businesses in a transaction that is likely to be closed over the next 9-12 months
• At an acquisition cost of US$1.6bn, while the deal appears to be a bargain for Axis Bank, the value accretion from Citi’s portfolio over the medium term is contingent on a host of factors including retention of existing customers, Axis Bank’s ability to continually add customers of such profile and its ability to up-sell and cross-sell
• Although the Citibank transaction adds significant heft to Axis Bank’s competitive positioning across cards and wealth management businesses, we believe that Axis Bank will need to up its game in order to create sustainable value from the Citibank portfolio.

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• Since its Q3FY22 result, Bajaj Auto (BJAUT) has outperformed NIFTY50 by ~15% amid worsening outlook on profitability, rising fuel prices and flattish demand outlook in key export markets.
• Though we keep our FY23E revenue estimates largely unchanged, we trim FY23E EBITDA margin by ~300bps to ~14.5% due to surge in RM costs, resulting in 2% cut in FY24E earnings.
• Though recent cost inflation would get partially reflected in Q4FY22, bulk of it would come Q1FY23E onward.

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• Wipro Ltd is India’s one of the largest IT services exporter and has a strong global presence
• It provides industry-wide solutions including next-gen services like Cloud Computing, Digital Transformations, IoT, Machine Learning, and ADM, among others.
• Wipro also has expertise in providing solutions in banking and financial and other services through its product and platform portfolio

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• Commodities and IT sectors are the biggest winners of FY22. In the last one year, the Metals sector has gone up 53%, Energy by 40%, commodities by 30%, and the IT index by 40%
• However, the consumer-facing sectors closed FY22 on a muted note with FMCG reporting growth of only 4% and the Auto sector of 5%
• The current market performance is factoring in the current rising inflation and the rising interest rate regime

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• As per our channel checks, OBER’s Thane launch has been pushed out to 1QFY23 (likely in Apr’22) v/s our initial expectation of an early launch in Mar’22 as the company awaits approvals.
• We had assumed INR6b of sales from the Thane project in 4QFY22, which will now spill over to FY23.
• While the delayed launch will impact our 4QFY22 presales/collections estimate, sales momentum in ongoing projects has largely remained intact.

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