IDFC Bank today announced a merger with non-banking financial company Capital First after the boards of directors of IDFC Bank and Capital First at their respective meetings held today approved the arrangement.
The swap ratio has been set at 139:10 (for 10 equity shares Of Capital First, 139 Shares of IDFC Bank will be allotted). Going by the share prices at close on Friday, the merger ratio favours Capital First. The deal, however, has to get the approval of Reserve Bank of India (RBI) and other maket regulators. According to closing prices the combined market capitalisation of the two entities is Rs 31,285 crore of which Rs23,019 (73.6 per cent) comes from IDFC Bank and Rs 8266 crore (26.4 per cent) is from Capital First.
The announcement is pursuant to IDFC Bank's stated strategy of "retailising" its business to complete their transformation from a dedicated infrastructure financier to a well-diversified universal bank, and in line with Capital First's stated intention and strategy to convert to a universal bank.
Capital First's founder and chairman V. Vaidyanathan will become chief executive of the combined entity, the statement said.
IDFC Bank and its parent IDFC Ltd a year ago announced talks to acquire some of Shriram Group's financial services businesses but the deal fell through due to disagreement on a share swap ratio.
Capital First, which also counts Singapore state investor GIC among its major investors, will bring in a loan book of nearly 230 billion rupees as of September 30, three million customers and a distribution network spanning 228 locations across the country.