Shares of private lender IDFC First Bank fell by as much as 6% on Tuesday, while shares of IDFC rose 6% to record highs after the companies approved a reverse merger. The merger aims to simplify the corporate structure of the companies and ease regulatory compliance. Under the deal, IDFC’s shareholders will receive 155 shares of IDFC First Bank for each set of 100 shares they currently own in IDFC. This values IDFC at a 16.3% premium to its last close. IDFC held a 39.93% stake in IDFC First Bank through IDFC Financial Holdings as of June 30. The Reserve Bank of India granted permission for IDFC to exit IDFC First Bank, allowing for the reverse merger. IDFC First Bank’s standalone book value is expected to increase by 4.9% as a result of the deal. Asutosh Mishra, an analyst at Ashika Stock Broking, stated that the merger was long-pending due to the complex legal structure of IDFC. IDFC First Bank had a loan book of INR 1.61 trillion and a balance sheet size of INR 2.4 trillion as of March 31. The approval of the HDFC-HDFC Bank merger may have been a catalyst for the IDFC-IDFC First Bank merger, according to Kranthi Bathini, an equity strategist at WealthMills Securities.
