IDFC First Bank shares traded in the red in the early morning trade on Tuesday (July 4) trade while the share price of IDFC Limited traded higher following the announcement of a swap ratio for the proposed merger between the two entities. Today, IDFC First Bank shares were down 3.42% at Rs 79.15 per share at 11:07 am IST, while IDFC Ltd. shares were up 2.52% at Rs 111.95 per share in the intraday trading. The amalgamation of IDFC Limited with IDFC FIRST Bank is seen in favour of IDFC shareholders as the merger will create value for IDFC's shareholders and provide direct shareholding in IDFC First Bank. This will help them to unlock the value of their investments in the business of IDFC FIRST Bank which is currently held by IDFC Limited through IDFC FHCL.
IDFC First Bank and IDFC said on Monday that both their respective boards had given the nod to the merger ratio of 155:100.
The Share Exchange Ratio for the amalgamation of IDFC Limited into and with IDFC FIRST Bank shall be 155 equity shares (credited as fully paid-up) of the face value of Rs 10/- each of IDFC FIRST Bank for every 100 fully paid-up equity shares of the face value of Rs 10/- each of IDFC Limited.
As a result of the proposed merger, the standalone book value per share of the Bank would increase by 4.9%, as calculated on audited financials as of March 31, 2023.
According to an exchange filing, IDFC First Bank has total assets of Rs 2,39,941.66 crore, a Net Worth of Rs 25,721.16 crore as on March 31, 2023, and a turnover of Rs 27,194.51 crore, Profit After Tax of Rs 2,437.13 crore for the financial year ended March 31, 2023.
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IDFC Limited has total assets of Rs 9,570.64 crore, a Net Worth of Rs 9,518.64 crore as of March 31, 2023, and a turnover of Rs 2,076.00 crore for the financial year ended March 31, 2023.
Meanwhile, IDFC Financial Holding Company Limited has total assets of Rs 10,822.44 crore, Net Worth of Rs 10,785.43 crore as on March 31, 2023, and turnover of Rs 3,676.31 crore for the financial year ended March 31, 2023.
In a regulatory filing to the stock exchanges on July 3, the company said, “All the shareholders and stakeholders of the IDFC FHCL, IDFC Limited and IDFC First Bank shall benefit from such growth at the Bank, leading to opportunity for value creation in the long run and for maximizing the value and returns to the shareholders.”
Why the merger?
It is believed 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. In addition, the merger will help create an institution with diversified public and institutional shareholders, like other large private sector banks, with no promoter holding.