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IDFC jumps 9% after IDFC First Bank favours 3-way merger

IDFC was trading 9.4% higher while IDFC First Bank gained 0.21%.

December 31, 2021 / 11:14 AM IST

Shares of IDFC Ltd surged over 9% on December 31 intraday, after the IDFC First Bank said that its board has favoured the merger of IDFC Ltd and IDFC Financial Holding Co Ltd (promoter group) with the bank.

At 11.04am, IDFC was trading 9.16 percent higher at Rs 60.75 apiece, while IDFC First Bank advanced 1.58 percent to Rs 48.20 on the BSE.   The benchmark Sensex was up 391.27 points or 0.68% at 58,185.59.

The said corporate restructuring activity will be subject to approval by the boards, shareholders and other necessary statutory/regulatory approvals, the private lender added.

IDFC Financial Holding Company holds 36.52% stake in the bank as of September 2021, while IDFC Holds 100% stake in IDFC FHCL.

The lender said its board has constituted a committee namely ‘Corporate Restructuring Committee’, to work on the terms of proposed merger including finalizing the Scheme, valuation, hiring advisors etc. as may be required.

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“The details will be provided at the time of finalization of the Scheme of Arrangement for Merger of IDFC and IDFC FHCL with IDFC FIRST Bank and approval by the respective Boards”, BSE Notice said.

According to RBI rules, IDFC as promoter is required to hold 40% stake for five years from the date of IDFC First Bank’s commencement of operations and this period ended on 30 September last year. In July 2021, RBI said that IDFC may exit now as promoter of the bank.

In October 2021, IDFC wrote a letter to IDFC First Bank on unlocking value for shareholders. In a letter titled, "Unlocking Value for IDFC Ltd. shareholders", IDFC through its holding company has sought the bank's views on the way ahead, which essentially means about the mode of parent's exit from the bank. The promoter has sought an 'early response' from the bank.
Moneycontrol Research
first published: Dec 31, 2021 11:10 am
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