IDFC First Bank, an Indian private sector bank, has completed merger with its parent company, IDFC, following the receipt of all necessary shareholder and regulatory approvals.
The merger is effective from 1 October 2024, as confirmed during the bank’s board meeting.
As part of the merger, shareholders of IDFC will receive 155 equity shares of IDFC First Bank for every 100 equity shares held as of the record date, 10 October 2024. These shares are expected to be credited to shareholders on or before 31 October 2024, subject to regulatory processes and clearances.
The reverse merger secured the Reserve Bank of India (RBI)’s nod in December last year. It was approved by the board of directors of both IDFC First Bank and IDFC in July 2023.
Established in 1997 as an infrastructure financing domestic financial institution (DFI), IDFC got the “in-principle” approval from the RBI to set up a bank in April 2014, which resulted in the creation of IDFC Bank.
In 2018, IDFC Bank merged with Indian non-bank financial institution Capital First, leading to the renaming of the bank to IDFC First Bank. As of 30 June 2023, IDFC through its non-financial holding company, held a 39.93% stake in IDFC First Bank.
Through the merger, IDFC First Bank aims to benefit from a simplified corporate structure, eliminating the need for a holding company. Additionally, the bank’s shareholding structure will align with that of other private sector banks in India, with no promoter holding.
Besides, the merger will lead to the transfer of approximately INR6bn ($72m) in cash and cash equivalents to the bank.
As a result of the merger, IDFC First Bank will cancel about 2.6 billion equity shares held by IDFC and issue nearly 2.4 billion new equity shares to IDFC shareholders according to the agreed swap ratio.
Consequently, the paid-up share capital of the bank will be reduced from 7.5 billion shares to 7.3 billion shares.
IDFC First Bank managing director and CEO V Vaidyanathan said: “IDFC FIRST Bank will now have a simplified corporate structure with no promoter holding. All global corporations like Bank of America, JP Morgan, HDFC Bank, ICICI Bank are professionally managed institutions with no promoter holding.
“Similarly, IDFC FIRST Bank can also build itself into a perennial institution like them. In that sense this merger is a landmark moment for the Bank.
“The Indian economy is expected to increase from $3.5 trillion to $30-35 trillion by 2047 which will lead to immense opportunities across all parts of banking. Notably the Indian credit market is expected to grow 15x in the next 20 years.”
