IDFC-IDFC First Bank Merger: Shares of IDFC First Bank Limited, private lender, will remain in focus next week because of the record date of the merger proposal. In its meeting held last month on September 27, the board approved the merger of IDFC Financial Holding Company Limited (IDFC FHCL) into IDFC Limited and IDFC Limited subsequently into IDFC First Bank Limited.
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Post the merger completion, IDFC First Bank will remain the only entity and the shareholders of IDFC Limited will be allotted the shares of IDFC First Bank at a pre-determined ratio. There will be no change in the Directors or management of IDFC First Bank Limited.
“Effective Date will be Tuesday, October 01, 2024, being the date on which the certified order of NCLT sanctioning the Scheme will be filed by IDFC FHCL, IDFC Limited and IDFC FIRST Bank with the Registrar of Companies (“ROC”)” the company said in the filing.
The last trading price of IDFC First Bank Limited’s stock is Rs 71.86 per share as of October 04. While the last trading price of IDFC Limited’s stock is Rs 109.40 per share.
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IDFC Merger Ratio Record Date
IDFC First Bank Limited in consultation with IDFC Limited has fixed Thursday, October 10, 2024 as record date for determining the shareholders of IDFC Limited who will be issued and allotted the shares of IDFC First Bank as per the scheme.
The shareholders of IDFC Limited will receive equity shares of the Bank in accordance with share exchange ratio decided by the Board in its meeting held on July 03, 2023, i.e., 155 equity shares of face value of Rs 10/- each of IDFC FIRST Bank for every 100 fully paid-up equity shares of face value of
Rs 10/- each of IDFC Limited.
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Purpose of merger
1. Simplified Corporate Structure: Post the amalgamation, there will be a simplified corporate structure at the Bank with no holding company.
2. Simplified shareholding Structure: The shareholding structure will be like other leading institutional private sector banks with no promoter holding. The Bank will continue to be professionally managed institution.
3. Cash and cash equivalents: As part of the merger, about ₹ 600 crores of cash and cash equivalents will flow to the Bank.
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4. Reduction of outstanding paid-up shares: 2,64,64,38,348 equity shares held by IDFC Limited in IDFC FIRST Bank will stand cancelled and in lieu of the same, IDFC FIRST Bank will issue ~2,47,99,75,876 new equity shares to the shareholders of IDFC Limited as per the agreed swap ratio. Hence there will be a reduction of ~16,64,62,472 equity shares (A minus B) in the paid-up share capital of the Bank, and the paid-up capital of the Bank will stand reduced from 7,48,27,31,991 shares to 7,31,62,69,519 equity shares post the transaction.
5. Eligible to pay dividends: Due to losses posted by the Bank in its early years largely due to legacy infrastructure and corporate loan accounts and due to write-off of goodwill due to prior transactions, the Bank had accumulated losses. This was restricting the Bank in its ability to pay dividends to shareholders. Such accumulated losses will be set off against the Securities premium Account of the Bank as part of the merger scheme. This would now enable the Bank to explore opportunities to pay dividend in future.
6. Unification & streamlining of the regulatory compliances.
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