The reverse merger of IDFC Limited with its banking unit IDFC First Bank has received approval from the Reserve Bank of India (RBI). The IDFC First Bank and IDFC boards authorized the reverse merger in July. “Regarding the composite scheme of amalgamation, subject to compliance with the terms specified therein, RBI has conveyed its ‘No Objection’ to IDFC Limited and IDFC Financial Holding Company (IDFC FHCL)’s letters dated December 26, 2023,” IDFC Ltd stated in a regulatory filing.
The IDFC First Bank and IDFC boards authorized the reverse merger in July.
The composite scheme of amalgamation calls for IDFC FHCL to merge with IDFC first, followed by IDFC into IDFC First Bank Ltd. According to the statement, the plan is still pending additional statutory and regulatory approvals, including those from the National Company Law Tribunal, the relevant shareholders, and the creditors of the participating companies under the relevant laws.
An IDFC shareholder will receive 155 shares under the proposed reverse merger strategy for every 100 shares they now own in the bank. The face value of each of the stocks is Rs 10. According to the audited financials as of March 2023, the standalone book value per share of the bank will increase by 4.9% following the merger. It also stated that as of June 2023, IDFC held 39.93% of IDFC First Bank through its non-financial holding company.
In 2015, IDFC, a private sector infrastructure lender, established IDFC Bank as a banking subsidiary, but it was unable to achieve the same level of success as its larger competitors, ICICI and IDBI.
Similar to HDFC Bank, the combined IDFC First Bank will be entirely owned by institutional and public shareholders rather than having a promoter company.
When IDFC first started out in 1997, it was an infrastructure lender. In April 2014, the RBI granted it permission to establish a bank in principle. When on-tap licensing became available in October 2015, it opened IDFC Bank and transferred the loans and liabilities of IDFC to the bank. It became IDFC First Bank and became a full-service universal bank in December 2018 after acquiring Capital First, a non-bank that had been concentrating on serving consumers and MSME’s since 2012.
