Shareholders approve IDFC's demerger scheme

Shareholders of IDFC will get equivalent shares in IDFC Bank

The decks are clear for IDFC to start private sector bank operations, as IDFC Bank with 20 branches from this October, following shareholders’ nod for a demerger process.

IDFC shareholders will get one share of IDFC Bank for each share of the infrastructure finance company. They unanimously approved the 'Scheme of Arrangement' at a meeting in Chennai. Its share closed higher at Rs 176, about 2.3 per cent over the previous close on the BSE.

On completion of the demerger, IDFC Financial Holding Company, a fully owned subsidiary of IDFC, will have 53 per cent stake in the bank. The rest would be held by IDFC’s shareholders.

IDFC Bank will start with about 20 branches, of which six will be in tier-I cities and around 15 in tier-VI ones. Another finance company, Bandhan Financial Services, which also got a licence from the Reserve Bank of India (RBI) to start a private bank, plans to commence operations in September.

For IDFC, the demerger will provide greater financial strength and flexibility, and access to greater funds and resources. With a balance sheet size of Rs 70,000 crore, the bank will have a loan book of Rs 50,000 crore. The loan book of IDFC will be transferred to IDFC Bank.

It has said it would create a ‘bimodal’ bank, to serve both ‘India’, the urban and semi-urban population, and ‘Bharat’, the under-penetrated regions and unbanked section of the population.

A nine-year plan has been prepared. The first phase, spread over three years, would focus on RBI compliance and experimentation of the business model. It includes the 18-month period till end-September 2015 for pre-launch work and to meet regulatory norms.