Calculate the mathematical probability of profitability

HDFC LTD merger into the HDFC Bank

@author: Rajesh Swarnkar

About:

HDFC Bank : Wikipedia

HDFC Bank Limited is an Indian banking and financial services company headquartered in Mumbai. It is India's largest private sector bank by assets and world's 10th largest bank by market capitalisation as of April 2021.

HDFC Limited : Wikipedia

Housing Development Finance Corporation (HDFCLTD) is India’s largest mortgage lender. The company provides housing finance to individuals and corporates. It is the parent company of HDFC Bank. HDFC holds 26.14% of shares in HDFC Bank.

HDFC Merger into HDFC Bank:

On 05-April-2022 HDFC announced that its board has approved the merger of its wholly-owned subsidiaries HDFC Investments Limited and HDFC Holdings Limited with HDFC Bank. For each 25 HDFCLTD shares held the shareholders will receive 42 HDFCBANK shares after the merger. More info here.

Problem statement:

Detailed probelm statement can be found on Reddit.

• Find the probability of profitable case $P(profit)$ if a shareholder decides to wait for 2 years for swap.

Modeling:

Below is logical probablity. However, it was suggested to use probabilitisc model:

Suggestion from Reddit:

Data Source of Ratios