IDFC FIRST Bank announces amalgamation with IDFC Limited

The board of directors of IDFC FIRST Bank announced the approval of a scheme to amalgamate IDFC Limited with IDFC FIRST Bank at a meeting held today.

The share exchange ratio for the merger will be 155 equity shares of IDFC FIRST Bank for every 100 equity shares of IDFC Limited, both with a face value of ₹10 each.

Following the proposed merger, the bank’s standalone book value per share is expected to increase by 4.9% based on audited financials as of March 31, 2023. The rationale behind the merger includes the simplification of the corporate structure and the creation of a diversified institution with public and institutional shareholders, mirroring other large private sector banks with no promoter holding.

However, the scheme’s finalization depends on obtaining the necessary approvals from authorities such as the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Competition Commission of India, the National Company Law Tribunal, and the Stock Exchanges, among others.

IDFC FIRST Bank and IDFC Limited to amalgamate. Photo courtesy of IDFC First Bank Photos/Wikimedia Commons.

IDFC Limited, an esteemed infrastructure financing domestic financial institution since 1997, received “in-principle” approval by the RBI to establish a bank in April 2014, which led to the formation of IDFC Bank Limited. The latter commenced operations in October 2015.

On December 18, 2018, IDFC Bank and Capital First merged and subsequently rebranded to IDFC FIRST Bank. As of June 30, 2023, IDFC Limited has a 39.93% shareholding of IDFC FIRST Bank through its non-financial holding company.

IDFC FIRST Bank, a full-service universal bank with a pan-India presence, has transformed from infrastructure financing to a universal banking franchise over the past four years. The bank’s deposit franchise has grown at a 4-year CAGR of 36% since the merger, reaching Rs. 136,812 crore by March 31, 2023.

The bank has increased its CASA ratio from 8.6% at the time of merger with Capital First in December 2018, to 49.77% as of March 31, 2023, and has established 809 branches and 925 ATMs.

As for assets, the bank has a diversified loan book of Rs 1,60,599 crores with a balance sheet size of Rs 239,942 crores as of March 31, 2023. The bank recorded a profit after tax (PAT) of Rs 2,437 crores in FY23, with a strong capital adequacy ratio of 16.82%. The bank aims to grow its balance sheet by 20-25% per year in the near to medium term.

V Vaidyanathan — IDFC FIRST Bank MD and CEO said: “With this merger, we are very happy to welcome all the shareholders of IDFC Limited to become direct shareholders of IDFC FIRST Bank. We have built a strong foundation for our Bank including a strong deposit franchise, digital innovation, customer friendly products, strong capital buffer, growing profitability and high corporate governance. We look forward to building on our vision to create a world class Bank in India with the support of existing and new shareholders.”