IDFC Stock Opens Higher as Share Swap Ratio for Merger with IDFC First Bank is Declared

4 Jul 2023 , 11:14 AM

On July 4, the IDFC stock opened 4 % higher following the announcement of the share swap ratio for the long-awaited merger with its banking arm. The boards of IDFC Ltd and IDFC First Bank finally disclosed the share swap ratio on July 3, bringing clarity to the merger process.

As per the ratio, shareholders of IDFC Ltd will receive 155 equity shares of IDFC First Bank for every 100 equity shares held. Based on the closing price on July 3, IDFC Ltd shareholders are getting a premium of 17 %. The IDFC stock rallied 7 % on Monday, indicating a premium of 24 % compared to the closing price on June 30.

The merger is expected to be completed this year, marking a significant development for both entities.

Prior to the merger, IDFC held a 39.93 % stake in IDFC First Bank through its non-financial holding company. As of March 31, 2023, it is projected that the merger will result in a 4.9% increase in the book value per share of the bank.

In a filing, the bank stated that the merger would simplify the corporate structure of IDFC FHCL, IDFC Limited, and IDFC First Bank by consolidating them into a single entity. It will also streamline regulatory compliance for these entities.

The bank emphasized that the merger would result in the creation of an institution with diversified public and institutional shareholders, similar to other large private sector banks, without any promoter holding.

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