IDFC to merge with IDFC First Bank

IDFC First Bank Merger: IDFC First Bank announced the merger of its parent IDFC Ltd with itself in an all-stock transaction, marking another major deal in the Indian banking space days after the amalgamation of the HDFC twins.

The boards of IDFC First Bank and IDFC have approved the reverse merger.

While the bank did not provide the likely valuation of the merged entity, based on Monday's closing prices of the two companies on BSE, the valuation is ₹71,767 crore.

IDFC and IDFC First Bank Merger Ratio

Under the proposed reverse merger scheme, an IDFC shareholder will get 155 shares for every 100 shares she/he holds in the bank. Both stocks have a face value of ₹10 each, IDFC First Bank said in a statement.

The share exchange ratio will result in a premium of about 20% on the closing market price of the shares of IDFC vis-a-vis IDFC First Bank as of June 30, 2023.

IDFC Chairman Anil Singhvi said the merger is the last phase of IDFC's corporate restructuring and will help create a financial services provider that offers seamless delivery of services to customers. It will augment operational efficiency for the merged entity and create synergies for our shareholders.

Post the merger, the standalone book value per share of the bank will increase by 4.9%, as calculated on the audited financials as of March 2023, it said, adding as of June 2023, IDFC through its non-financial holding company, owned 39.93% in IDFC First Bank.

IDFC was an infra lender in the private sector space, and following its bigger peers like ICICI and IDBI, it also launched a banking subsidiary in 2015, IDFC Bank, but could not make a mark as the other two could do.

Effective July 1, India Inc's biggest merger came into effect when the mortgage major HDFC merged itself with its banking arm in an all-stock deal valued at $40 billion. Post-merger, announced on April 4, 2022, HDFC Bank is the world's fourth most valued bank with $200 billion in valuation after JP Morgan Chase, ICBC of China and Bank of America.

The new giant, fully owned by public shareholders with no promoter entity, has a balance sheet of close to ₹33 lakh crore, with the assets alone sniffing at ₹23 lakh crore and also the largest mortgage book with close to ₹7 lakh crore of loans.

The merger will lead to simplification of the corporate structure of both entities by consolidating them and other subsidiaries into a single entity, helping streamline regulatory compliances, the companies said in separate but identical statements.

Like HDFC Bank, the merged IDFC First Bank will also have no promoter entity, but fully owned by institutional and public shareholders.

The merger scheme is subject to all requisite approvals from the Reserve Bank, Sebi, Competition Commission, National Company Law Tribunal and stock exchanges, and shareholders of both entities.

In a separate statement, IDFC also said its board approved the reverse merger with the bank, and said the composite scheme of amalgamation includes the merger of IDFC and IDFC Financial Holding Company with IDFC First Bank.