DBS Group Holdings share price in India adventure

Since early November 2020, DBS Group Holdings share price went on an explosive run, surging from $20.35 to a high of $25.00 on 23 November. The driving factors for the bullish run of DBS Group Holdings share price were the excellent 3rd quarter financial result, the 95% efficacy of COVID-19 vaccine trial and Joe Biden being confirmed as the new President of United States.

Nonetheless, DBS Group Holdings share price turned cold turkey after the stunning announcement of a proposed merger of its wholly owned subsidiary, DBS Bank India Limited (DBIL), with the ailing Lakshmi Vilas Bank. Market reactions were mixed, causing DBS Group Holdings share price to lose steam.

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Obviously, many Singapore investors are still miffing over the epic multi-billion fines meted out by Indian court against Singtel in November 2019. That saga caused Singtel to record its first quarterly loss amounting to a whopping $668 million. But will DBS Group suffer the same fate and what could be the long-term impacts on DBS Group Holdings share price?

To put things into perspective, Singtel’s India adventure is not a total flop as the telco war is coming to an end in India and there is light at end of tunnel for Singtel’s Airtel. In the long run, Airtel should complement Singtel’s narrative as a regional telco player. In addition, fellow Strait Times Index (STI) compatriots, Sembcorp Industries and Wilmar have successful investments in India in recent years. So I believe it is really too premature to claim that the India merger would spell the beginning of the end for DBS Group Holdings share price.

Of course, not many investors will agree with me. There are also many analysts who are sceptical of DBS Group turning the ailing India bank. However, to be fair to the management, in the DBS FY2019 annual report, there was intention to scale DBS’ presence in India when the bank converted its operations to wholly-owned subsidiary with 21 new branches to complement the digibank. In this article, I will share my insights on the impacts of the merger with Lakshmi Vilas Bank on DBS Group Holdings share price.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in DBS Group share before. Whether DBS Group Holdings share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

DBS Group share price seeks scaling

In my opinion, the merger with Lakshmi Vilas Bank should be more of a short-term distraction for DBS Group Holdings share price. The deal is not going to impact the cash-flow as the bank recorded strong net cash inflow from operating activities amounting to $5.82 billion in 1HFY2020. Given that DBS is only injecting $463 million into the ailing Indian bank, shareholders should be assured that the deal will not impact liquidity nor is unlikely to affect the dividend pay outs.

Then the next question is whether the merger will be a game-changer for DBS Group Holdings share price in the long-run. In this regard, there are two reference points which investors can draw on. The first would be the [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: November 24, 2020 — 11:30 am

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