FTSE is set to gradually increase the weighting of HDFC Bank

FTSE Russell has outlined its plan to adjust the free float of HDFC Bank following its merger with Housing Development Finance Corporation (HDFC). This adjustment will be carried out in three phases, starting in September 2023, as per the notification issued on August 7.

The proposed implementation will occur alongside the index reviews scheduled for September 2023, December 2023, and March 2024. However, the latter two phases are subject to HDFC Bank’s foreign headroom maintaining the required minimum of 10 percent, as detailed in the notification.

Presently, there are 308.2 crore shares in issue, with an investability weight of 95.9 percent. The total index shares amount to 295.8 crore.

In the initial September phase, shares in issue will increase to 754.49 crore, with an investability weight of 74 percent, resulting in 383.3 crore index shares. The tranching factor at this stage stands at 33 percent, according to FTSE’s information. By December 2023, the tranching factor will rise to 66 percent. Shares in issue will remain at 754.49 crore, with a corresponding investability weight and index shares of 470.8 crore.

The third and final phase in March 2024 will see a 100 percent tranching factor, pushing index shares to 558.3 crore. While the shares in issue will maintain their count at 754.49 crore, the investability weight will stay at 74 percent.

Taking into account client feedback on the potential effects of a one-time implementation of the shares in issue and free float update at the September review, FTSE Russell opted for a phased approach.

The merger between HDFC and HDFC Bank took effect on July 1, leading to the formation of a merged bank entity valued at $172 billion, securing the fourth position in global equity market capitalization. As a consequence of this merger, HDFC’s shares were delisted from Indian stock exchanges on July 13.