Capital First, IDFC Bank up 6% on completion of merger

In past one week, Capital First and IDFC Bank have rallied 15% each after the NCLT approved their merger.

Shares of Capital First (Rs 600) and IDFC Bank (Rs 43.40) were up 6% each on the BSE after these companies informed about the completion of their merger following the receipt of all requisite shareholder and regulatory approvals. The merged entity will be called IDFC First Bank, subject to shareholders’ approval.

In past one week, Capital First and IDFC Bank have rallied 15% each after the National Company Law Tribunal (NCLT) approved their merger. In comparison, the S&P BSE Sensex was up 2% during the same period.

Following the merger, the Board of IDFC Bank on Tuesday approved the appointment of V. Vaidyanathan, founder and chairman of Capital First, as Managing Director and Chief Executive Officer (MD & CEO) of the merged entity, subject to shareholders’ approval.

“The merger presents an incredible opportunity to strengthen our banking capabilities, operate as a larger universal bank and bring immense benefits to our customers,” said V. Vaidyanathan, MD & CEO of IDFC First Bank.

On a combined basis, IDFC First Bank has on-book loan assets of Rs 1.04 trillion, as per the last reported financial results for the quarter ended September 30, 2018. The retail loan book will now contribute 32.46% to the overall loan book.

The merger was announced on January 13, 2018, and as per the terms of the merger agreement shareholders will receive 139 shares of IDFC Bank for 10 shares held in Capital First.

IDFC Bank has fixed Monday, December 31, 2018, as the ‘record date’ for determining the shareholders of Capital First who would be entitled to receive shares of the bank under the approved scheme.

“While the merger may result in some near-term operational headwinds, we believe that the growth prospects, as well as profitability, may only improve, backed by a combination of lower cost of funds (coming from deposits in the bank) and higher yields of the retail loans from CFL’s book along with the robust growth in IDFC Bank’s retail assets. Once concluded, this merger will surely be a game changer for both the entities,” analyst at Centrum Broking had said Q2FY19 result update.