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.
Rationale:
- 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.
- The merger will help create an institution with diversified public and institutional shareholders, like other large private sector banks, with no promoter holding.
The Scheme is subject to the receipt of requisite approvals from the Reserve Bank of India (“RBI”), Securities and Exchange Board of India (“SEBI”), the Competition Commission of India, the National Company Law Tribunal, BSE Limited and the National Stock Exchange of India Limited (collectively, the “Stock Exchanges”) and other statutory and regulatory authorities, and the respective shareholders, under applicable law.
Background: IDFC Limited, a premier, successful infrastructure Financing Domestic Financial Institution (DFI) since 1997, was granted “in-principle” approval by the RBI to set up a Bank in April 2014, leading to the creation of IDFC Bank Limited. The Bank started its operation in October 2015. The loan assets and liabilities of IDFC Limited were transferred to IDFC Bank. Capital First Limited was a successful consumer and MSME financing institution since 2012 with a strong track record of growth, profits, and asset quality.
On December 18, 2018, the IDFC Bank and Capital First merged, and subsequently renamed IDFC FIRST Bank. As of June 30, 2023, IDFC Limited through its non-financial holding company has 39.93% shareholding of IDFC FIRST Bank.
IDFC FIRST Bank is a full-service universal bank with pan-India presence. The Bank has transformed from infrastructure financing to a universal banking franchise in the last four years. The Bank has built a strong deposit franchise, which has grown at a 4-year CAGR of 36% since the merger to reach Rs. 136,812 crore by March 31, 2023. The Bank has increased CASA ratio from 8.6% at the time of merger with Capital First in December 2018, to 49.77% (March 31, 2023) and has set up 809 branches and 925 ATMs as of March 31, 2023.
In terms of assets, the Bank has a well-diversified loan book of Rs. 1,60,599 crore with a balance sheet size of Rs. 239,942 crore as on March 31, 2023. The Bank recorded a PAT of Rs. 2,437 crore in FY23, with strong Capital Adequacy of 16.82% as of March 31, 2023. The Bank aims to grow its balance sheet by 20-25% per year in the near to medium term.
Speaking about the merger Mr. Sanjeeb Chaudhuri, Chairperson, IDFC FIRST Bank, said, “This is an important event for the Bank and for all the shareholders of the Bank as well as IDFC Limited. 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.”
Speaking about the merger, Mr. V. Vaidyanathan, MD & CEO, IDFC FIRST Bank, 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.”
“India provides terrific opportunities for growth, and we have built significant specialization in our business lines. We look forward to strong growth with quality in the years to come.”
Advisors:
Deloitte Touche Tohmatsu India LLP and Mr. Harsh Chandrakant Ruparelia (Registered Valuer) 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.
JM Financial Limited acted as Financial Advisor to IDFC FIRST Bank.
