IDFC First Bank to merge with IDFC, makes India’s largest corporate deal

• This will be the second major merger deal in the financial sector in 2023, after HDFC Bank’s merger with Housing Development Finance Corporation. IDFC First Bank Ltd announced their merger with IDFC Ltd on 3rd July 23.
• The Bank will issue and allot to the eligible shareholders of IDFC, 155 new equity shares of the face value of 10 each (cancelling the shareholding of IDFC held through IDFC FHCL in the Bank in its entirety).
• The share exchange ratio will result in a premium of about 20% on the closing market price of the shares of IDFC vis-à-vis IDFC FIRST Bank Limited on June 30, 2023. Also, IDFC paid special dividend of Rs.11/- per share in February 2023 to the Shareholders of the Company.
• As per the IDFC first bank ltd, their standalone book value per share of the Bank would increase by 4.9%, as calculated on audited financials as of March 31, 2023.

The key benefits of this merger plan are as follows:

• As a result of the merger, shareholders of IDFC Limited will directly own shares of IDFC FIRST Bank, which will result in value being unlocked for them.
• By combining IDFC FHCL, IDFC Limited, and IDFC FIRST Bank into a single organization, the merger will simplify the corporate structure of the three firms and aid in streamlining their accounting and regulatory compliance requirements.
• The merger will help create an institution with diversified public and institutional shareholders, like other large successful Indian private sector banks.
• A company with a diverse group of shareholders will encounter it easier to raise equity capital from time to time.