On Monday, the boards of directors of IDFC First Bank Ltd and IDFC Limited authorised their merger. The share exchange ratio for the merger of IDFC Limited and IDFC First Bank shall be 155 equity shares of face value Rs 10 of IDFC First Bank for every 100 equity shares of face value Rs 10 of IDFC Limited. This comes just days after Housing Development Finance Corp Ltd merged with HDFC Bank in a $40 billion merger, the largest in Indian corporate history.
According to the lender, the standalone book value per share of the bank would increase by 4.9% as a result of the proposed merger, based on audited financials as of March 31, 2023.
The BSE scrip of IDFC Ltd closed on Monday.
“By consolidating IDFC FHCL, IDFC Limited, and IDFC First Bank into a single entity, the merger will simplify the corporate structure of the aforementioned entities and help streamline regulatory compliances.” “The merger will contribute to the formation of an institution with diverse public and institutional shareholders, similar to other large private sector banks, with no promoter holding,” IDFC First Bank stated in a stock exchange filing.
“This is an important event for the Bank and all of the shareholders of the Bank as well as IDFC Limited,” stated Sanjeeb Chaudhuri, Chairperson of IDFC FIRST Bank. We are now embarking on the next chapter of our growth journey in order to achieve our long-term vision and produce long-term shareholder value.”
IDFC First Bank
V Vaidyanathan, MD & CEO of IDFC First Bank, commented on the merger, saying, “With this merger, we are very happy to welcome all the shareholders of IDFC Limited to become direct shareholders of IDFC FIRST Bank.” We have established a solid foundation for our bank, which includes a strong deposit franchise, digital innovation, customer-friendly products, a robust capital buffer, expanding profitability, and high corporate governance. We are excited to expand on our vision.
“Today marks an important day in our journey towards creating value for our stakeholders,” stated Anil Singhvi, Chairman of IDFC Limited. As IDFC nears the end of its organisational restructuring, the merger with IDFC First Bank will contribute to the creation of a financial services behemoth, enabling seamless service delivery to our consumers. It will improve operational efficiency for the merging firm and create synergies for our stakeholders.”
IDFC Limited, an infrastructure finance organisation (DFI), was granted permission by the RBI in April 2014 to establish IDFC Bank Limited. The bank began operations in October of 2015. The loan assets and liabilities of IDFC Limited were transferred to IDFC Bank. Capital First Limited was a successful consumer and SME lending institution. On December 18, 2018, IDFC Bank and Capital First amalgamated and were rebranded IDFC First Bank. IDFC Limited, through its non-financial holding company, owned 39.93% of IDFC First Bank as of June 30, 2023.
IDFC First Bank claims a 4-year CAGR of 36% from the merger to reach Rs 1,36,812 crore by March 31, 2023. The bank boosted its CASA ratio from 8.6% at the time of its merger with Capital First in 2007.