IDFC First Bank and IDFC Limited have received board approval for their merger, adopting a 155:100 share exchange ratio. The move aims to simplify the corporate structure, streamline regulatory compliance, and enhance shareholder value. Post-merger, the standalone book value per share of IDFC First Bank is set to increase by 4.9%, according to audited financials as of March 31, 2023.
Key Details:
- Merger Approval: Boards of IDFC First Bank Ltd and IDFC Limited approved the merger, consolidating them into a single entity.
- Share Exchange Ratio: The share exchange ratio for the amalgamation is set at 155 equity shares of IDFC First Bank for every 100 equity shares of IDFC Limited.
- Market Reaction: IDFC Ltd’s scrip closed 7% higher at Rs 110, while IDFC First Bank’s scrip closed 3% higher at Rs 81.7 on the BSE.
- Simplification of Structure: The merger aims to simplify the corporate structure, similar to recent industry trends, and streamline regulatory compliances.
- Financial Impact: The proposed merger is expected to increase the standalone book value per share of IDFC First Bank by 4.9%.
- Strategic Benefits: The merger will create an institution with diversified public and institutional shareholders, eliminating promoter holding.
Statements from Key Figures:
- Sanjeeb Chaudhuri (Chairperson, IDFC FIRST Bank): Emphasized the importance of the merger for the bank and shareholders, expressing anticipation for the next growth phase.
- V Vaidyanathan (MD & CEO, IDFC First Bank): Welcomed IDFC Limited shareholders to become direct shareholders, highlighting the bank’s strong foundation, deposit franchise, and growth potential.
- Anil Singhvi (Chairman of IDFC Limited): Marked the merger as a crucial step in creating a financial services powerhouse and concluding the last phase of corporate restructuring.
Background:
- IDFC Limited: Initially an infrastructure financing institution, it set up IDFC Bank Limited in 2015. The merger with Capital First in 2018 resulted in the formation of IDFC First Bank.
- IDFC First Bank’s Growth: The bank has demonstrated a 4-year CAGR of 36%, reaching Rs 1,36,812 crore by March 31, 2023, post the merger with Capital First.
- Operational Milestones: IDFC First Bank has achieved notable milestones, including a CASA ratio increase from 8.6% to 49.77% and the establishment of 809 branches and 925 ATMs as of March 31, 2023.
Conclusion:
The merger of IDFC First Bank and IDFC Ltd marks a strategic move to optimize operational efficiency and create synergies, reflecting broader trends in the financial services sector. Investors are likely to monitor the developments closely to gauge the impact on both entities.