Bitter merger pill for Bank of Baroda investors, stock falls over 16%

Sharp fall in share price mirrors near-to-medium term challenges, with many brokerages downgrading their earlier rating

Knee-jerk or not, investors’ initial reaction is a thumbs-down to the proposed merger of Dena Bank and Vijaya Bank with Bank of Baroda (BoB). The latter’s stock price took a steep 16-plus per cent hit on Tuesday, the highest such loss under P S Jayakumar’s leadership.

A number of brokerages view the merger as a negative furing the medium term for the bank and have downgraded their rating on the stock. Three key immediate concerns outweigh the possible gains from the merger.

First, the merger has been announced when BoB shows signs of a turnaround and is improving its provision coverage, laying