The board of directors of IDFC First Bank at its meeting held on Monday approved the scheme of amalgamation of IDFC with the bank with a share exchange ratio of 155 equity shares of face value of Rs 10 each of IDFC First Bank for every 100 equity shares of face value of Rs 10 each of IDFC.
The private-sector lender proposes to complete the merger by this year. This will be the second major merger deal in the financial sector in 2023 after HDFC Bank merger and Housing Development Finance Corporation.
As a result of the proposed merger, the standalone book value per share of the bank would increase by 4.9%, as calculated on audited financials as of March 31, 2023.
IDFC holds about 40% stake in IDFC First Bank through IDFC Financial Holding. IDFC is completely held by the public.
The merger will lead to simplification of the corporate structure of IDFC Financial Holding, IDFC and IDFC First Bank by consolidating them into a single entity and will help streamline the regulatory compliances of the aforesaid entities.
It will also help create an institution with diversified public and institutional shareholders, like other large private sector banks, with no promoter holding, the release said.
The scheme is subject to the receipt of requisite approvals from the Reserve Bank of India, Securities and Exchange Board of India, the Competition Commission of India, the National Company Law Tribunal, and exchanges.
IDFC, a domestic financial institution, was granted “in-principle” approval by the RBI to set up a bank in April 2014. Subsequently, IDFC First Bank began operations in 2015.
In December 2018, IDFC Bank and Capital First merged, and the bank was subsequently renamed as IDFC First Bank. As of June 30, 2023, IDFC through its non-financial holding company hold a 39.93% stake in IDFC First Bank.
The bank’s loan book stands at Rs 1.6 trillion as on March 31.
The merger will help create an institution with diversified public and institutional shareholders, like other large private sector banks, with no promoter holding, it said.
“We now embark on the next phase of our growth journey towards our long-term vision, and to create sustainable shareholder value in the years to come,” Sanjeeb Chaudhuri, chairperson, IDFC First Bank, said.
V Vaidyanathan, MD & CEO, IDFC First Bank, said, “We have built a strong foundation for our bank including a strong deposit franchise, digital innovation, customer friendly products, strong capital buffer, growing profitability and high corporate governance.”
