The Reserve Bank of India approved the reverse merger of IDFC Ltd and its banking unit, IDFC First Bank. In July, the board of IDFC First Bank and IDFC authorized the reverse merger.
“IDFC Limited and IDFC Financial Holding Company (IDFC FHCL) have received letters dated December 26, 2023 from RBI whereby RBI has conveyed its ‘No Objection’ to the composite scheme of amalgamation, subject to compliance with the terms specified therein,” IDFC Ltd said in a regulatory filing.
IDFC FHCL would first merge with IDFC as part of the composite merger strategy, and then IDFC would become IDFC First Bank Ltd.
“The scheme remains subject to other statutory and regulatory approvals, including from the National Company Law Tribunal and the respective shareholders and creditors of the companies involved under the applicable laws,” according to the statement.
Under the planned reverse merger method, an IDFC shareholder will receive 155 shares for every 100 shares held in the bank. Each share is worth Rs 10 in face value.
Based on audited financials as of March 2023, the standalone book value per share of the bank will increase by 4.9 percent following the merger, it said, adding that IDFC held 39.93% of IDFC First Bank through its non-financial holding company as of June 2023.
IDFC was a private sector infrastructure lender that, like its larger peers ICICI and IDBI, established a banking subsidiary, IDFC Bank, in 2015, although it did not have the same influence as the other two.
Like HDFC Bank, the merged IDFC First Bank will have no promoter firm and will be wholly controlled by institutional and public shareholders.
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IDFC originated as an infra lender in 1997. The RBI granted it in-principle approval to establish a bank in April 2014, and in October 2015, it established IDFC Bank when on-tap licensing began, following which IDFC’s debts and liabilities were transferred to the bank.
It purchased Capital First, a consumer and MSME-focused non-bank that had been in business since 2012, in December 2018 and rebranded it IDFC First Bank to become a full-service universal bank.
