Will follow path and structure of ICICI, HDFC Bank: IDFC First Bank CEO

'Basically, IDFC FIRST Bank will become a widely held, diversified financial institution with a diversified set of shareholders'

IDFC First Bank on Monday approved the merger with IDFC. The swap ratio for the amalgamation of IDFC into and with IDFC FIRST Bank is 155 equity shares each of IDFC First Bank for every 100 shares of face IDFC. V Vaidyanathan, MD and CEO of IDFC First Bank, talks about the benefit of merger in a telephonic interview with Manojit Saha. Edited excerpts:

What is the scheme of merger just announced by IDFC and IDFC First Bank?

IDFC holds 39.93 per cent in IDFC FIRST Bank. As part of the merger, IDFC FIRST Bank will issue 155 equity shares for every 100 shares of IDFC and IDFC FIRST Bank will extinguish the existing shares of IDFC FIRST Bank held by IDFC.

What are the benefits for IDFC First Bank following the merger?

IDFC FIRST Bank will become a widely held, diversified financial institution with a diversified set of shareholders. Think of large public institutions, such as ICICI Bank and HDFC Bank, with no promoter holding, we will follow their hallowed path and structure. The bank would have no promoter.

What are the benefits to IDFC shareholders?

They get to unlock their shares as they will get shares directly in the operating entity, the bank. At least now the air is cleared, and the speculation about the merger would have gone.

What were growth numbers for the last quarter?

I can’t talk about this quarter now as we are in a silent period. But we can talk about how the trend line of the bank has been over the prior rep­orted quarters. In Q3, our deposits grew 44 per cent YoY.

How much was the loan growth?

In the fourth quarter of last year, the loan book grew by 25 per cent. The interesting thing is that the growth in profits outpaced the growth in the loan book for many quarters now.

What are the benefits of the merger?

With all merger-related speculations out of the way, we can comfortably concentrate on growing the bank. There are big opportunities out there.

Is there any impact on capital?

Networth could go up to the extent of cash with IDFC at the date of merger. At current estimates, the bank’s book value per share will be up 5 per cent over book value as of March 2023 because of the merger, that’s a big takeaway. But the bigger thing is the ability to look ahead rather than look at these corporate actions.
 

Merger share swap ratio of IDFC First Bank and IDFC at 155:100
 
The board of IDFC on Monday approved the share exchange ratio for its proposed merger with IDFC First Bank. According to the announcement, shareholders of IDFC will be allotted 155 shares of IDFC First Bank for every 100 shares held. At current prices, the share swap ratio favours IDFC as its 100 shares are worth Rs 10,910, while 155 shares of IDFC First Bank are valued at Rs 12,701. Shares of IDFC last closed at Rs 109.1, while that of IDFC First Bank finished at Rs 81.9 on the BSE. “The merger will augment opera­tional effici­ency for the merged entity and create synergies for our share­holders,” said IDFC Chairman Anil Singhvi.              
BS REPORTER