IDFC First Bank merger: Ratio fixed at 155:100, amalgamation to complete this year

IDFC First Bank: The bank said the board members have approved the amalgamation of IDFC with the bank. The share exchange ratio for the amalgamation will be 155 equity shares of IDFC First Bank for every 100 equity shares of IDFC. As a result of the proposed merger, the standalone book value per share of the bank would increase by 4.9% as per financials FY23.

IDFC First Bank and IDFC Ltd on July 3 said that the ratio of the merger will be 155:100.

"Post merger, the book value per share of the bank would increase by 4.9 percent, as calculated on audited financials as of March 31, 2023," the bank said in a regulatory filing.

Earlier, on March 21, IDFC Ltd and IDFC Financial Holding Company Ltd appointed Axis Capital Ltd for the fairness opinion on the share exchange ratio for the merger with the bank.

Also read: IDFC hires Axis Capital for fair opinion on share exchange ratio for merger with IDFC First

The companies completed all stages of corporate simplifications. “The next step is the amalgamation with IDFC First Bank Limited,” the company said in an exchange filing. "We propose to complete the amalgamation in this financial year, barring unforeseen circumstances."

The companies also appointed SSPA & Co, Chartered Accountants as registered valuer for recommendation of fair share exchange ratio and Cyril Amarchand Mangaldas - Law Firm for conducting legal due diligence, drafting and finalising scheme of amalgamation and filing regulatory applications.

As of June 30, 2023, IDFC Limited through its non-financial holding company has 39.93% shareholding of IDFC FIRST Bank.

The merger

The bank in the filing said that the merger will lead to simplification of the corporate structure of IDFC FHCL, IDFC Limited and IDFC FIRST Bank by consolidating them into a single entity and will help streamline the regulatory compliances of the aforesaid entities.

"The merger will help create an institution with diversified public and institutional shareholders, like other large private sector banks, with no promoter holding," the bank said.

On February 1, IDFC Ltd has said that its board had accorded in-principle approval to invest Rs 2,200 crore approximately in IDFC First Bank to take its equity holding up from the current 36.38 percent to a maximum of up to 40 percent.

IDFC First Bank's deposit franchise has grown at a 4-year compound annual growth rate (CAGR) of 36 percent since the merger to reach Rs. 1.36 lakh crore by March 31, 2023. The bank increased its current account and savings account (CASA) ratio from 8.6 percent from the time of its merger with Capital First in December 2018, to 49.77 percent till March 2023.

Also read: Reverse merger with IDFC would set IDFC First Bank stock free

According to RBI rules, the shareholding of the non-operative financial holding company, which is the promoter of the bank, should be a minimum of 40 percent of the paid-up voting equity capital of the bank which will be locked in for a period of five years from the date of commencement of the business of the bank.

IDFC Bank was given a licence by the RBI along with Bandhan Bank in 2014. In 2018, IDFC Bank Ltd and Capital First Ltd announced the completion of merger to become IDFC First Bank.