How Saurabh Mukherjea views the HDFC-HDFC Bank combine

Market expert Saurabh Mukherjea remains bullish on HDFC Bank shares. In an interaction with CNBC-TV18, Mukherjea, Founder and Chief Investment Officer of Marcellus Investment Managers, who has been positive on the lender's stock, said he has never doubted the lender's underlying performance.

He said HDFC Bank is the only player in the entire private sector banking basket to have gained market share in the past three years.

The comments from the market veteran and ace fund manager come came after HDFC and HDFC Bank announced an all-stock merger that would create one of the largest lenders in the world. The amalgamation is subject to shareholder and regulatory approvals.

HDFC Bank, HDFC Life and HDFC Assets shares are a part of Marcellus Investment's client portfolio, and owned by Mukherjea and his family in large quantities, he said.

The HDFC twin shares surged on Monday after the news of the merger, helping the mortgage lender join HDFC Bank - the country's largest lender by market capitalisation - among the top five Indian companies by market value.

The deal, in Mukherjea's view, will quicken HDFC Bank’s EPS from the historical 20 percent levels by a couple of percentage points.

In about 18 months, HDFC and its two subsidiaries, HDFC Investments and HDFC Holdings, will become part of HDFC Bank, creating a lender with a balance sheet of Rs 17.9 lakh crore and net worth of Rs 3.3 lakh crore.

Describing the HDFC-HDFC Bank combine as a "merger of equals", HDFC Chairman Deepak Parekh said: "As the son grows older, he acquires the father's business... This is a friendly merger. We won't be thrown out. After 45 years in housing finance, we have to find a home for ourselves which we found in our own family company HDFC Bank," he said.

HDFC CEO Keki Mistry said the merger will be earnings per share (EPS)-accretive from the very first day after the completion of the transaction.

Mukherjea, however, also said that the return on equity (ROE) picture looks a little unclear.

"We will have to do a little bit more work on our RoE but intuitively, given the match that Keki (Mistry) and Sashidhar Jagdishan (CEO of HDFC Bank) were laying out, RoE too nudges up by potentially 200 basis points. So you create a giant lender with EPS growth to the north of 20 percent and RoE of 20 percent, that is very exciting going into an economic recovery," he said.

Shareholders will get 42 shares of HDFC Bank for every 25 shares held in HDFC under the proposed merger.

"We are happy as shareholders and we wish management teams of both entities the very best as they as they go about the sort of massive job of pulling together two of India's most successful financial services companies," said the fund manager, who views the deal as a win-win situation for shareholders of both lenders.

"The only concern in HDFC Bank was because they didn't have the mortgage book themselves, they would sell the mortgage book on to HDFC and HDFC Bank, and, therefore, had to rotate their book far quicker than they would have otherwise liked to, which put it at a disadvantage compared to ICICI Bank, which could sit on the mortgage book," he said.