After the merger of HDFC Ltd with HDFC Bank, IDFC First Bank is carrying out a similar exercise. The board of directors of IDFC First Bank on Monday approved the scheme of amalgamation of its parent IDFC Ltd with IDFC First Bank.

Under the proposed merger, shareholders of IDFC Ltd will get 155 equity shares of IDFC First Bank for every 100 shares held.

“The merger will lead to simplification of the corporate structure of IDFC Financial Holding, 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 private lender said.

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

It will involve the amalgamation of IDFC Financial Holding with IDFC, and of IDFC with the bank. 

IDFC Ltd holds about 40% stake in IDFC First Bank through IDFC Financial Holding. IDFC Ltd is 100% held by the public.

As a result of the proposed merger, the standalone book value per share of the bank would increase by 4.9%, as of 31 March. The bank’s deposit franchise has grown at a CAGR of 36% in four years to touch Rs 136,812 crore as on 31 March 2023.

The merger is subject to approvals from the Reserve Bank of India (RBI), the Securities and Exchange Board of India (Sebi), the Competition Commission of India, the National Company Law Tribunal (NCLT), the stock exchanges and other statutory and regulatory authorities, besides the shareholders of both the listed firms.

“We look forward to building on our vision to create a world-class bank in India with the support of existing and new shareholders," said IDFC First Bank managing director and CEO V. Vaidyanathan.

As IDFC Ltd enters the last phase of its corporate restructuring, its chairman Anil Singhvi says the merger with IDFC First Bank will help create a financial services powerhouse enabling seamless delivery of services to its customers.

“It will augment operational efficiency for the merged entity and create synergies for our shareholders," Singhvi said.

In April 2014, the Reserve Bank of India (RBI) granted in-principle approval to IDFC to set up a bank, leading to the creation of IDFC Bank Ltd and IDFC Financial Holding Co. All the regulated businesses were transferred to the IDFC FHCL following the approval. In December 2018, IDFC Bank and Capital First Ltd merged and was subsequently renamed IDFC First Bank.

IDFC, as a promoter, was required to hold a minimum of 40% equity in the bank for five years, till 30 September 2020.

“Post-in-principle approval to merge IDFC and IDFC FHCL with the bank, granted in December 2021, the board of IDFC is working untiringly to get the best value of its asset and noteworthy was the sale of AMC business to Bandhan Group," IDFC Ltd said in a statement on Monday.

The bank has a loan book of Rs 1.61 trillion with a balance sheet size of Rs 2.4 trillion as on 31 March. The bank reported a net profit of Rs 2,437 crore in FY23, with capital adequacy of 16.82%. The aim is to grow the balance sheet by 20-25% per year in the near to medium term.

“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,” said IDFC First Bank chairperson Sanjeeb Chaudhuri.

Deloitte Touche Tohmatsu India LLP and Harsh Chandrakant Ruparelia acted as valuers to IDFC First Bank; ICICI Securities provided a fairness opinion on the valuation provided by the valuers. AZB & Partners acted as legal advisors to IDFC First Bank, and JM Financial Ltd acted as the financial advisor.