IDFC Shares Hit 52-Week High, IDFC First Bank Falls 6% After Merger Announcement

IDFC Ltd shares reached their fresh 52-week high of Rs 115.50 while IDFC First Bank plunged 6 per cent in early trade on BSE on 4 July after the board of IDFC First Bank approved its merger with IDFC Ltd.

Shares of IDFC opened at Rs 115.40 compared to the previous close of Rs 109.10 and surged around 6 per cent to record the 52-week high of Rs 115.70. On the other hand, IDFC First Bank shares opened trading at Rs 81.94 against the previous close on the same price and fell 6 per cent to Rs 77.10. 

However, IDFC lost most of the gains and traded 2.11 per cent higher at Rs 111.50 at 1:15 pm and IDFC First Bank shares were 3.72 per cent down at Rs 78.90. 

On 3 July, the board of IDFC First Bank approved its merger with IDFC through an amalgamation scheme. The share swap ratio has been fixed at 115:100, which means shareholders of IDFC will get 155 equity shares of IDFC First Bank for every 100 equity shares of IDFC Bank.

‘’The share exchange ratio for the amalgamation of IDFC Limited with IDFC First Bank shall be 155 equity shares of the face value of ₹10/- each fully paid-up of IDFC First Bank for every 100 equity shares of the face value of ₹10/- each fully paid-up of IDFC Ltd,'' said IDFC First Bank in a stock exchange filing.

According to the filing, the board has approved the amalgamation of IDFC Financial Holding Ltd into IDFC and subsequently, IDFC will merge with IDFC Bank. The announcement comes after the completion of the Rs 3.2 lakh crore-worth merger deal between HDFC Ltd and HDFC Bank.

The IDFC-IDFC Bank merger is subject to the approval of shareholders and regulatory bodies like RBI, SEBI, the Competition Commission of India (CCI), BSE Ltd, NSE Ltd, and the National Company Law Tribunal (NCLT).

As of March 2023, IDFC First Bank has a turnover of Rs 27,194.51 crore and held total assets of Rs 2.4 lakh crore. The bank reported a net profit of Rs Rs 2437.13 crore for the fiscal year 2022-23. IDFC Ltd reported total assets of Rs 9,570.64 crore and a turnover of Rs 2,076 crore. 

The merger will lead to the simplification of the corporate structure of IDFC Financial Holding Ltd, IDFC Limited, and IDFC First Bank by consolidating them into a single entity, according to IDFC First Bank. It will also help streamline the regulatory compliances of the three companies. 

According to domestic brokerage firm Nuvama Alternative & Quantitative Research, IDFC First Bank is the top probable contender for MSCI August 2023 Standard Index inclusion. The stock needs to surge around 10 per cent from current levels to touch Rs 85 per share by the third week of July to make the cut for inclusion. If included, the stock is likely to receive $170-180 million in inflows. 

Nuvama added that the proposed merger, which is expected to take around 12 to 15 months from now to complete, will not impact its chances of inclusion. The only trouble could be the stock not reaching the price-cut of level requirement.