IDFC-IDFC First Bank Merger: All you need to know

Last updated:
IDFC-IDFC First Bank merger

Private sector lender IDFC First Bank and non-banking financial company IDFC announced a merger deal with an exchange ratio of 155:100. The exchange ratio means investors of IDFC will get 155 equity shares of IDFC First Bank for 100 shares held.

The merger is aimed at simplifying IDFC Bank’s corporate structure and easing regulatory compliance, on similar lines of a recent merger between HDFC Bank and HDFC. 

The merger is expected to increase the book value per share of IDFC First Bank by 4.9%, based on audited financials as of March 31, 2023. It will consolidate IDFC FHCL, IDFC Limited, and IDFC First Bank into a single entity, simplifying the corporate structure.

IDFC-IDFC Bank Merger: Mixed stock reactions

IDFC First Bank share price dropped 4% on Jul 4, 2023, while IDFC shares ended the session 2% higher, hitting their record highs!

IDFC First Bank: Historical Share Performance

(Data as on July 4, 2023) 

IDFC: Historical Share Performance

(Data as on July 4, 2023) 

Key Factors: IDFC First Bank

  • IDFC First Bank was formed through the merger of IDFC Bank Ltd and Capital First Ltd in December 2018.
  • The bank has witnessed significant growth in its deposit franchise, achieving a compound annual growth rate (CAGR) of 36 percent over a four-year period.
  • As of March 31, 2023, the bank's deposits amounted to Rs. 1.44 lakh crore.
  • The bank’s loan book amounted to Rs 1.5 lakh crore 
  • IDFC Limited, through its non-financial holding company, currently holds a 39.9% stake in IDFC First Bank. 

Key Factors: IDFC 

  • IDFC is a NBFC and the parent company of IDFC First Bank.
  • IDFC’s business includes IDFC Bank, IDFC Securities, IDFC Mutual Fund, IDFC IFL and IDFC Foundation. 
  • IDFC’s total revenues at the end of the quarter ended March 2023 amounted to nearly Rs 1800 crores and assets worth Rs 9570 crores. 

IDFC First Bank-IDFC Merger: Timelines

March 21, 2023IDFC hires Axis Capital for fair opinion on share exchange ratio for merger with IDFC First
Jul 03, 2023The boards of IDFC Limited and IDFC First Bank approve the merger of the two companies
July 03, 2023Ratio fixed at 155:100. IDFC's shareholders will get 155 shares of IDFC First Bank for each set of 100 shares they currently own in the former.
2021The Reserve Bank of India in 2021 allowed IDFC to exit IDFC First Bank as a five-year share lock-in period ended in 2020.
2018IDFC Bank merged with Capital First in 2018 to create IDFC First Bank.

IDFC-IDFC First Bank Merger: How it impacts customers, investors and the banking landscape?

Customers of both entities wouldn't find any material change vis-à-vis their daily banking requirements. However, stock investors might need to wait and watch how the combined entity performs as a whole. IDFC First Bank is among the top private sector lenders in India, but is relatively smaller than its larger banking peers, providing significant room to grow.

For instance, the IDFC First Bank's total deposits amounted to Rs 1.4 lakh crore in March 2023, while HDFC Bank's total deposits amounted to Rs 18 lakh crore during the same period.

The mega-merger between HDFC and HDFC Bank has sparked the debate of banking system consolidation in India, a point which has been under the regulator's scrutiny. 

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.