On buzz of merger with HDFC Bank: JM Financial stock soars

Analysts say uptick in J M stock indicates market has some knowledge of deal possibly cooking between two companies

Shares of JM Financial shot up 10 per cent to Rs 28.85 on Tuesday, on speculation in the market that HDFC Bank was in talks to acquire Nimesh Kampani’s integrated financial services firm.

When contacted, JM Financial said it doesn’t comment on market speculations as a matter of policy, while HDFC Bank did not respond to an emailed questionnaire on the issue. But in an earnings call on Tuesday, the bank’s Deputy Managing Director Paresh Sukthankar said the bank did not have any inorganic growth plans.

Analysts said the acquisition would make sense for HDFC Bank, which has been building its investment banking team internally. The acquisition would give HDFC Bank better capabilities in investment banking, broking and distribution. HDFC Securities, a subsidiary of HDFC Bank, had 190 branches and 1.6 million customers at the end of FY13. The subsidiary derived profits from broking and distribution of financial services products and its net profit for FY13 stood at Rs 66.8 core.

JM Financial had applied for a banking licence but did not get it. The group has the option of applying for one after the Reserve bank of India comes up with guidelines for differential licences. According to disclosures made by JM Financial at the end of the March quarter, the Kampani family owns 25.37 per cent in the company, bodies corporate own 43.18 per cent, mutual funds three per cent and foreign institutional investors hold 9.45 per cent.