RBI Gives Nod To Merger Of IDFC, IDFC First Bank
Reserve Bank of India (RBI) has approved IDFC's reverse merger with its banking subsidiary IDFC First Bank, according to a regulatory filing. In July, the boards of IDFC First Bank and IDFC authorised the reverse merger.
"….IDFC and IDFC Financial Holding Company (IDFC FHCL) have received letters dated 26 December 2023 from RBI whereby RBI has conveyed its 'No Objection' to the composite scheme of amalgamation, subject to compliance with the terms specified therein," according to a regulatory statement filed by IDFC.
As part of the composite merger strategy, IDFC FHCL would first combine with IDFC and then IDFC would become IDFC First Bank.
"The scheme remains subject to other statutory and regulatory approvals, including from the National Company Law Tribunal and the respective shareholders and creditors of the companies involved under the applicable laws," according to the statement.
An IDFC shareholder will receive 155 shares for every 100 shares held in the bank under the proposed reverse merger strategy. Each stake has a face value of Rs 10.
According to the merger scheme, 264.64 crore shares of IDFC FIRST Bank held by IDFC would be extinguished, and 248 crore new shares of IDFC FIRST Bank would be issued to IDFC Ltd shareholders based on their holdings, based on the share exchange ratio specified above.
The standalone book value per share of the bank will increase by 4.9 per cent after the merger, based on audited financials as of March 2023, it said, adding that as of June 2023, IDFC held 39.93 per cent of IDFC First Bank through its non-financial holding company.
IDFC was a private sector infrastructure lender that, like its larger peers ICICI and IDBI, formed a banking subsidiary in 2015, IDFC Bank, but it failed to make the same impact as the other two.
The amalgamated IDFC First Bank, like HDFC Bank, will have no promoter company and will be entirely controlled by institutional and public shareholders. In 1997, IDFC began as an infra lender. In April 2014, it received in-principle approval from the RBI to establish a bank, and in October 2015, it created IDFC Bank when on-tap licencing began, after which IDFC's debts and liabilities were transferred to the bank.
In December 2018, it acquired Capital First, a consumer and MSME-focused non-bank that had been in operation since 2012, and rebranded it IDFC First Bank to become a full-service universal bank.
