IDFC merger ratio approved by board, Streamlining Corporate Structure
MUMBAI: The boards of IDFC Financial Holding Co. Ltd, IDFC Ltd, and IDFC First Bank have given their approval for a merger, which will see IDFC shareholders receiving 155 equity shares of the bank for every 100 shares held.
The merger plan involves the consolidation of IDFC Financial Holding into IDFC, and IDFC into IDFC First Bank. The boards initially approved the proposal in December 2021.
In a regulatory filing on Monday, it was stated that the merger would simplify the corporate structure of IDFC Financial Holding, IDFC Ltd, and IDFC First Bank, resulting in a single entity. This streamlining process aims to enhance regulatory compliance. The merger will also create an institution with diverse public and institutional shareholders, similar to other major private sector banks, with no promoter holding.
If the merger goes ahead, the standalone book value per share of the bank would increase by 4.9% as of March 31.
However, the merger is subject to approval from various regulatory authorities, including the Reserve Bank of India (RBI), the Securities and Exchange Board of India (Sebi), the Competition Commission of India, the National Company Law Tribunal (NCLT), stock exchanges, and respective shareholders.
V. Vaidyanathan, the managing director and chief executive of IDFC First Bank, expressed enthusiasm about the merger, stating, “We look forward to building on our vision to create a world-class bank in India with the support of existing and new shareholders.”
Anil Singhvi, chairman of IDFC Ltd, mentioned that the merger with IDFC First Bank would contribute to the conclusion of the final phase of IDFC’s corporate restructuring. He emphasized that it would establish a financial services powerhouse capable of delivering seamless services to customers and enhance operational efficiency and shareholder synergies.
IDFC received in-principle approval from the Reserve Bank of India (RBI) in April 2014 to establish a bank, leading to the creation of IDFC Bank Ltd and IDFC Financial Holding Co. All regulated businesses were transferred to IDFC FHCL following the approval. In December 2018, IDFC Bank merged with Capital First Ltd and subsequently became IDFC First Bank.
As a promoter, IDFC was required to hold a minimum of 40% equity in the bank for five years until September 30, 2020.
“Following the in-principle approval to merge IDFC and IDFC FHCL with the bank, granted in December 2021, the board of IDFC is diligently working to maximize the value of its assets, and the sale of the AMC business to the Bandhan Group was noteworthy,” IDFC Ltd stated in a Monday statement.
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As of March 31, the private lender has a loan book of ₹1.61 trillion and a balance sheet size of ₹2.4 trillion. In FY23, the bank reported a profit after tax of ₹2,437 crore and aims to achieve a 20-25% annual growth in its balance sheet in the near to medium term.
Valuation services for IDFC First Bank were provided by Deloitte Touche Tohmatsu India LLP and Harsh Chandrakant Ruparelia, while ICICI Securities offered a fairness opinion. AZB & Partners served as legal advisors to IDFC First Bank, and JM Financial Ltd acted as the financial adviser.
About IDFC:
IDFC (Infrastructure Development Finance Company Limited), a finance company under the Department of Financial Services of the Government of India, is primarily focused on providing finance and advisory services for infrastructure projects, in addition to asset management and investment banking solutions.
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