Shares of HDFC Bank Ltd fell 4.2% after Nomura Holdings Inc. downgraded its rating on the business it absorbs from its parent, leading to a downgrade.
India’s largest private sector lender was downgraded to “neutral” from “buy” – the first downgrade since the merger in July – making the stock the worst performer on the NIFTY 50 index on Wednesday and also the largest Drag factors. The stock fell 6% in two trading days.
“We struggle to see growth over the next 12 months,” Nomura analysts led by Param Subramanian wrote in a note on Wednesday, expressing concerns over HDFC’s return on assets and pressure on loan growth.
In July, HDFC Bank merged with its parent company HDFC Ltd. in hopes of broadening its business scope beyond traditional banking products.
HDFC Bank said in a presentation to analysts on Monday that the net value of its parent business was valued at 1.12 billion rupees ($13.5 billion) as of July, about 16% lower than the figure reported in March.
The company said the adjustment was due to valuation based on Indian GAAP accounting rules and certain merger-related compliances.
HDFC Bank had 44 buys, three holds and no sells, according to data compiled by Bloomberg.
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