India's IDFC First Bank slips, IDFC hits record high on merger approval (updated)

Housing Development Finance

04/07/2023 08:20

(Updates share price, adds background and analyst comments)
    By VarunVyas Hebbalalu and Siddhi Nayak
       BENGALURU/MUMBAI, July 4 (Reuters) - Shares of private
lender IDFC First Bank  IDFB.NS  fell as much as 6% on Tuesday,
while those of IDFC rose 6% to record highs after the companies
approved a reverse merger aimed at simplifying their corporate
structure and easing regulatory compliance.
    As part of the deal - coming on the heels of a similar
merger between HDFC Ltd and HDFC Bank - non-banking lender
IDFC's shareholders will get 155 shares of IDFC First Bank for
each set of 100 shares they currently own in the former.
    That values it at 127.02 rupees per share, at a 16.3%
premium to IDFC's last close. 
    IDFC held a 39.93% stake in the banking arm through IDFC
Financial Holdings as of June 30.  
    The Reserve Bank of India in 2021 allowed IDFC to exit IDFC
First Bank as a five-year share lock-in period ended in 2020,
paving way for the reverse merger.
    First set up in 2014 as IDFC Bank, IDFC First Bank was later
formed when the lender and Capital First merged in 2018.
    "This was a long pending merger which was stuck due to the
complex legal structure of IDFC and hence, took time to unwind,"
said Asutosh Mishra, analyst at domestic brokerage house Ashika
Stock Broking.
    IDFC First Bank's standalone book value would increase by
4.9% as a result of the deal, the lender said.
    IDFC First Bank had a loan book of 1.61 trillion rupees and
a balance sheet size of 2.4 trillion rupees as on March 31.
    The HDFC-HDFC Bank merger, which created a $40 billion
financial behemoth may have been a catalyst to push the
approval, said Kranthi Bathini, equity strategist at WealthMills
Securities. 

($1 = 81.9550 Indian rupees)

 (Reporting by Varun Vyas in Bengaluru; Editing by Nivedita
Bhattacharjee)
 ((varunvyas.hebbalalu@thomsonreuters.com;))