IDFC Share Price Rises 6% and IDFC First Bank Share Price Falls 6% After Board Approves Merger
Shares of IDFC witnessed a 6% increase in price, while IDFC First Bank experienced a 6% decline in share price following the approval of their merger by the board. However, IDFC’s stock soon erased all gains and traded 0.14% lower, while IDFC First Bank’s shares were down 5.09%.
On July 3, the board of IDFC First Bank approved the merger with IDFC through an amalgamation scheme, with a fixed ratio of 155:100. The merger, targeted for completion by the end of the year, marks the second major deal in the financial sector in 2023, with HDFC Bank’s merger with Housing Development Finance Corporation being the first.
Under the proposed merger, shareholders of IDFC Ltd will receive 155 shares of IDFC First Bank for every 100 shares held in the former. In a regulatory filing to the stock exchanges, IDFC First Bank stated, The share exchange ratio for the amalgamation of IDFC Limited with IDFC First Bank shall be 155 equity shares of the face value of ₹10/- each fully paid-up of IDFC First Bank for every 100 equity shares of the face value of ₹10/- each fully paid-up of IDFC Ltd.
As of the end of March, IDFC First Bank boasted total assets of ₹2.4 lakh crore and a turnover of ₹27,194.51 crore. The bank reported a net profit of ₹2437.13 crore for the financial year 2023. On the other hand, IDFC Ltd had total assets of ₹9,570.64 crore and a turnover of ₹2,076 crore.
According to IDFC First Bank, the merger will simplify the corporate structure of IDFC First Holding Company Limited, IDFC Limited, and IDFC First Bank by consolidating them into a single entity. It will also streamline the regulatory compliances of these entities.
CLSA, a global brokerage firm, has maintained an ‘underperform’ view on IDFC First Bank with a target price of ₹85. The firm believes that the swap ratio for the proposed merger is relatively positive for IDFC shareholders. It pointed out that the share count of IDFC First Bank will decline by 2.5%, while the book value per share (BVPS) will rise by 4.9%.
This news highlights the developments in the merger between IDFC and IDFC First Bank, as well as the impact on their respective share prices. Investors and stakeholders will be closely monitoring the progress of the merger as it moves towards completion.
