IDFC Bank to merge with Capital First

IDFC Bank to merge with Capital First; V Vaidyanathan to be CEO of merged entity

The swap ratio indicated that for 10 equity shares Of Capital First, 139 Shares of IDFC Bank will be allotted.

IDFC Bank today announced a merger with non-banking financial company Capital First after a board meeting held earlier today approved the arrangement. The swap ratio has been fixed at 139:10 (139 shares of IDFC Bank will be allotted for every 10 equity shares of Capital First).

As part of the deal, Bipin Gemani, the Chief Financial Officer of IDFC Limited has resigned from the company and will now be joining as the interim CFO of IDFC Bank. V Vaidyanathan, currently Chairman and MD of Capital First, will succeed Rajiv Lall as MD and CEO of the combined entity upon completion of the merger and necessary regulatory approvals.

In a press statement, the bank said this announcement is pursuant to IDFC Bank's 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.

“We believe this merger will be transformational for IDFC Bank. It will bring two tech savvy, culturally aligned platforms to come together to create a diversified and fast growing universal bank with a national footprint, in a manner that will be value accretive for all shareholders,” said Lall.

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This deal is subject to reguilatory clearances including from Reserve Bank of India (RBI) and other authorities.

Capital First brings with it a retail lending franchise with a loan book of Rs 22,974 crore (September 2017), a live customer base of three million customers; and a distribution network in 228 locations.

Vaidyanathan said they acknowledge a banking platform provides a stable diversified liability base, and is hence critical for building a large franchise.

“We are excited about this merger because IDFC Bank provides a perfect platform for continued growth of the combined franchise, supported by low-cost funding,” he added.

Post the merger, the combined entity of IDFC Bank and Capital First will have an AUM of Rs 88,000 crore; PAT of Rs 1,268 crore (FY17). Further, there will be a combined 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.

Post the merger, Lall 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.

In 2015, IDFC had received the banking licence from the Reserve Bank of India (RBI) and was among the new banks (including Bandhan Bank) to get an approval from RBI to start banking operations, Capital First, on the other hand, is a non-banking financial company engaged in the lending business.