IDFC Bank-Capital First Merger: RBI Gives Nod; Stocks Rally

BW had reported earlier in January when IDFC Bank and Capital First declared that they are to merge to create an entity with a diversified book which will straddle corporate, small enterprises, and retail with combined assets of Rs 88,000 crore, a 195-branch strong network and customer base of over 5 million. 

The Reserve Bank of India (RBI) on Wednesday gave its approval for the merger. The merger process has got approval from Competition Commission of India, National Housing Board, NSE, BSE and SEBI.

Following the news IDFC Bank advanced as much as 6.93 per cent to Rs 40.90, its biggest intraday gain in percentage terms since January 11. Capital First climbed as much as 4.78 per cent to Rs 558.50 -- its biggest intraday rise since May 31.

After the RBI approval,  NCLT (National Company Law Tribunal) and shareholder approval that is pending. 

V. Vaidyanathan, founder and executive chairman, Capital First, told BW Businessworld that the entire process could take another four to five months.

Vaidyanathan will be the MD and CEO of the new entity.

Also Read: IDFC Bank and Capital First Merger: Who Gains?

Capital First and IDFC Bank, with this merger in an all-stock deal, are set to create a Rs 88,000-crore combined entity. The share swap ratio for themerger is fixed at 139:10, meaning IDFC Bank will issue 139 shares for every 10 shares of Capital First.

Capital First has a customer base of 3 million and a distribution network in 228 locations across the country. Its gross and net NPAs stood at 1.63per cent and 1 per cent, respectively as on September2017. Post-merger, the combined entity will have assets under management (AUM) of Rs 88,000 crore.

The new entity will have a distribution network comprising 194 branches, 353 dedicated banking correspondent outlets, over 9,100 micro ATM points, and will serve more than 5 million customers.

Asked by BW Businessworld, how does the new entity look at the future, especially when that the banking sector was under stress, Vaidyanathan said that while that might be true pertaining to some sectors like steel, the new entity would cater to small players, for whom the economy was doing just fine.