As part of the merger plan, the share swap ratio entails the issuance of 155 IDFC First Bank shares for every 100 shares of IDFC held.
On Monday, the board of IDFC First Bank Ltd. sanctioned a proposal to merge IDFC Ltd. and IDFC Financial Holding Co. with the bank. However, the completion of the merger is contingent on obtaining approvals from regulatory authorities and other statutory entities, as stated in the exchange notice issued by the private bank.
The merger will encompass the integration of IDFC Financial Holding Co. and IDFC with the bank, along with the reduction of the securities premium account of the bank.
As part of the merger deal, a share swap ratio of 155 IDFC First Bank shares will be issued for every 100 shares of IDFC held.
IDFC, the parent company, currently holds a 39.93% stake in IDFC First Bank through the non-financial holding company, IDFC Financial Holding Co. However, this shareholding will be completely eliminated once the merger is finalized.
According to the bank's exchange filing, the merger aims to establish an institution with a diverse set of public and institutional shareholders, similar to other major private sector banks, where there will be no specific promoter holding.
The announcement of IDFC First Bank's merger comes shortly after the merger of HDFC Ltd. into HDFC Bank Ltd. on July 1.
As per the Reserve Bank of India's licensing guidelines, IDFC was subject to a five-year lock-in period, during which it functioned as a promoter of IDFC First Bank.
While the RBI granted IDFC an in-principle license in 2014, the bank officially commenced operations in 2015. Later, in 2018, IDFC Bank merged with Capital First Ltd., a non-banking finance company. As a promoter, IDFC was obligated to maintain a minimum equity stake of 40% in IDFC First Bank for a period of five years from the commencement of operations.
The bank, in its exchange notice, stated that the amalgamation would result in IDFC Ltd. shareholders directly holding shares in IDFC First Bank, leading to a more streamlined shareholding structure.
In September 2021, IDFC shareholders voted out the then Chairman, Vinod Rai, due to delays in selling the company's asset management business, which was perceived as an obstacle to the merger with the bank.
In December 2021, the IDFC board appointed Anil Singhvi as its chairman and granted in-principle approval for the merger.
Subsequently, in April 2022, IDFC finalized a Rs 4,500 crore deal, selling IDFC Asset Management Co. and IDFC AMC Trustee to Bandhan Bank Ltd.
For the valuation process of IDFC First Bank, Deloitte Touche Tohmatsu India LLP and Harsh Chandrakant Ruparelia served as valuers, while ICICI Securities provided a fairness opinion on the valuation. Legal advice was provided by AZB & Partners, and JM Financial acted as the financial advisers to IDFC First Bank.
For IDFC, SSPA & Co served as the valuers, and Axis Capital provided the fairness opinion. Cyril Amarchand Mangaldas acted as the legal advisors for IDFC.
