The board of IDFC First Bank Limited has granted approval for the merger of IDFC Limited with IDFC First Bank, aiming to combine the two entities into a single institution and simplify the corporate structure. This announcement closely follows the recent $40 billion merger between HDFC and HDFC Bank.
Under the proposed merger, the share exchange ratio has been determined as 155 equity shares of IDFC First Bank for every 100 equity shares of IDFC Limited. Upon completion of the merger, it is anticipated that the standalone book value per share of IDFC First Bank will increase by 4.9% based on audited financials as of March 31, 2023. The primary objectives of the merger include streamlining regulatory compliance and establishing an institution with diverse public and institutional shareholders, similar to other large private sector banks, while eliminating any promoter holding.
It should be noted that the merger is subject to obtaining necessary approvals from regulatory authorities, and shareholder approval will also be required in accordance with applicable laws.
IDFC Limited, a prominent Domestic Financial Institution (DFI) in infrastructure financing since 1997, received “in-principle” approval from the RBI to establish a bank in April 2014. This led to the creation of IDFC Bank, with the transfer of loan assets and liabilities from IDFC Limited to IDFC Bank. Subsequently, on December 18, 2018, IDFC Bank merged with Capital First Limited, resulting in the formation of IDFC First Bank. Currently, IDFC Limited holds a 39.93% shareholding in IDFC First Bank through its non-financial holding company.