IDFC-IDFC First Bank merger proposal gets CCI nod; stock up 2%

Shares of private lender IDFC First Bank Ltd opened in green on Wednesday after the bank received a clearance from the competition regulator Competition Commission of India (CCI) for its merger with Infrastructure Development Finance Company (IDFC).

The stock, which opened the gap up at ₹92.50, surged to an intra-day high of ₹93.13, up 2.1% since yesterday's trading session close. At the current share price of ₹92.42 on the BSE, the private lender's m-cap stands at ₹65,151.65 crore. The stock is trading at 8.25% down from the 52-week high achieved on September 5, 2023. It surged 1.04% in the past week but is down 0.74% in the past month. In the six-month, year-to-date, and one-year periods, the stock has surged 63.36%, 51.23%, and 63.65%, respectively.

IDFC First Bank, in an exchange filing, says: "The CCI vide its letter dated today, i.e. October 17, 2023, has communicated that it has considered and approved the combination under Green Channel Route, pursuant to the notice jointly filed by IDFC FHCL, IDFC Limited, and IDFC FIRST Bank."

The merger proposal, however, is yet to receive approvals from the stock exchanges, Securities and Exchange Board of India, Reserve Bank of India, National Company Law Tribunal, and other statutory and regulatory authorities, and its shareholders.

The IDFC First Bank board had approved the merger with its promoter group IDFC Ltd at an "arm's length basis" in July this year. Post the proposed merger, the standalone book value per share of the bank will increase by 4.9%. The proposal says the share exchange ratio will be 155 equity shares of the face value of ₹10 each of IDFC First Bank for every 100 fully paid-up equity shares of the face value of ₹10 each of IDFC Ltd.

IDFC Bank has said it’ll 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 the regulatory compliances”. 

As of date, IDFC Limited, through IDFC Financial Holding Company Ltd, holds a 39.93% stake in IDFC First Bank, and IDFC Ltd is the promoter of IDFC First Bank.

IDFC First Bank has a total assets of ₹2,39,941.66 crore, a net worth of ₹25,721.16 crore as of March 31, 2023, and a turnover of ₹27,194.51 crore. Its net profit as of the financial year ending March 31, 2023, was ₹2,437.13 crore. 

IDFC Ltd’s assets value stands at ₹9,570.64 crore, with its net worth at ₹9,518.64 crore (as of March 31, 2023). Its turnover was ₹2,076.00 crore for the financial year ended March 31, 2023.  IDFC Financial Holding Company's assets are worth ₹10,822.44 crore, with a net worth of ₹10,785.43 crore as on March 31, 2023, and a turnover of ₹3,676.31 crore as of March 2023.

The IDFC board will meet on October 28, 2023, to approve the unaudited standalone and consolidated financial results for Q2 FY24. Ratings agency CRISIL Ratings Ltd this month assigned its rating ‘CRISIL AA+/Stable’ to the Tier-II bonds of the bank amounting to ₹3,000 crore. Further, CRISIL also reaffirmed its rating CRISIL AA+/Stable’ and ‘CRISIL A1+’ to the Tier-II bonds of the bank amounting to ₹5,000 crore and certificate of deposits worth ₹45,000 crore, respectively.  

Notably, if IDFC's merger proposal is accepted, it'll be another big development in the banking space since HDFC and HDFC Bank's merger in July 2023. The HDFC-HDFC Bank merger is touted to be the biggest transaction in India's corporate history, which will have combined assets of nearly ₹15 lakh crore.