IDFC First Bank-IDFC Ltd Merger Gets Shareholders' Nod

The voting on amalgamation scheme was held on Friday, in a meeting convened by the Chennai-bench of the National Company Law Tribunal (NCLT). The bank stated, "We wish to inform that the resolution approving the scheme was passed by an overwhelming majority of 99.95% of the equity shareholders representing more than three-fourth in value of the equity shareholders of the Bank voting through remote e-voting and e-voting during the meeting, in terms of the provisions of Sections 230-232 of the Companies Act, 2013." Similarly, an "overwhelming majority of 99.99% of the Non-Convertible Debenture (NCD) holders" also voted in favor of the merger.

IDFC First Bank-IDFC Merger: Share Exchange Ratio

The share exchange ratio for the amalgamation of IDFC Ltd with IDFC FIRST Bank "shall be 155 equity shares of face value of ₹10 each fully paid-up of IDFC FIRST Bank for every 100 equity shares of face value of ₹10 each fully paid-up of IDFC Ltd", the lender had said in a media release in July 2023. According to the amalgamation scheme, 264.64 crore shares of IDFC FIRST Bank held by IDFC Ltd will get extinguished, and based on the share exchange ratio mentioned above, 248 crore new shares of IDFC FIRST Bank would be issued to the shareholders of IDFC Ltd based on their respective holdings. Consequent to the 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.

Benefits of IDFC First Bank-IDFC Merger

The merger will result in value unlocking to IDFC Limited shareholders as, after the merger, they will directly hold shares in IDFC FIRST Bank. 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 accounting and regulatory compliances of the aforementioned entities. The merger will help create an institution with diversified public and institutional shareholders, along with other large successful Indian private sector banks.

Raising equity capital from time to time will become easier in an institution with a diversified set of shareholders. Shares of IDFC First Bank gained by 0.39% in the special trading session on Saturday to close at ₹77.35 apiece on the NSE.
The approval from the Reserve Bank of India (RBI) and the favorable vote from the shareholders signify a positive step towards the successful merger of IDFC First Bank and IDFC Ltd. The share exchange ratio and other details mentioned above play a crucial role in shaping the future course of action for both entities involved.

In conclusion, the merger of IDFC First Bank and IDFC Ltd holds the promise of enhanced value for shareholders, streamlined operations, and a stronger financial position in the competitive landscape. The approval from the regulatory authorities and the support from the shareholders indicate a favorable outlook for the amalgamation. As the process moves forward, both entities are poised to leverage their strengths and create a stronger entity that can navigate the dynamic financial markets effectively.