IDFC Bank, Capital First to merge in share swap deal Saturday January 13, 2018

IDFC Bank and Capital First announced that their respective boards of directors at their meetings held on Saturday January 13, 2018, approved a merger of Capital First with IDFC Bank. 

Pursuant to the merger which is subject to regulatory and shareholder approvals, IDFC Bank will issue 139 shares for every 10 shares of Capital First. 

With this move, IDFC Bank has put the failed amalgamation bid with Shriram Group behind it.

Deal Valuation

The deal values Capital First - owned more than a third by private equity firm Warburg Pincus - at Rs. 938.25 a share based on the two companies' Friday closing price and giving the company a market value of Rs. 9,278 crore ($1.46 billion), Reuters calculations showed.

That is a premium to Capital First's Friday closing price of Rs. 837.50, or equal to a market capitalisation of about Rs. 8,300 crore, according to Thomson Reuters data.

Retail focus

Post-merger, the combined entity of IDFC Bank and Capital First will have an assets under management of Rs. 88,000 crores; PAT of Rs. 1,268 crores (FY 17); and a distribution network comprising 194 branches (as per branch count of December 2017 of both entities), 353 dedicated BC outlets and over 9,100 micro ATM points, serving more than five million customers across the country.

IDFC Bank, in a statement said, this announcement is pursuant to its stated strategy of "retailising" its business to complete their transformation from a dedicated infrastructure financier to a well-diversified universal bank, and in line with Capital First’s stated intention and strategy to convert to a universal bank.

Capital First brings with it a retail lending franchise with a loan book of Rs. 22,974 crores (September 2017), a live customer base of three million customers; and a distribution network in 228 locations across the country growing at a five-year CAGR of 27 per cent on AUM and 40 per cent in profits, with gross and net NPA at 1.63 per cent and 1.0 per cent respectively.

V Vaidyanathan to head combined entity

V Vaidyanathan, currently Chairman and MD of Capital First, will succeed Dr. Rajiv Lall as MD and CEO of the combined entity upon completion of the merger and necessary regulatory approvals.

Post-merger, Rajiv Lall, Founding MD and CEO of IDFC Bank from 2015 to the present, will step into the role of non-executive Chairman of IDFC Bank, subject to regulatory approvals, and guide the transition process. He will replace Veena Mankar who will remain on the Board. 

On Friday Jan 12,2018, IDFC Bank shares closed down 1.31 per cent at Rs. 67.65 on the BSE while Capital First shares ended 0.05 per cent higher at Rs. 835.90.