Expect To Close Merger In Nine To 12 Months: IDFC First Bank CEO

IDFC First Bank Ltd. expects the merger of its parent IDFC Ltd. and IDFC Financial Holding Co. into itself to be completed over the next nine to 12 months.

In an interview with BQ Prime, Managing Director and Chief Executive Officer V Vaidyanathan said the merger would not only simplify the corporate structure of the IDFC Group, but also result in improved book value per share for the bank.

"IDFC, give or take, has about Rs 600 crore worth of cash on their own balance sheet, which they got through the sale of (AMC business) stake to Bandhan Bank," Vaidyanathan said. "To that extent our net worth goes up."

Through the merger, IDFC First Bank's shareholding will also be diversified, which could make the decision-making process easy as there is no one group of shareholders who exert control.

The merger, announced on Monday, will see IDFC First Bank issuing 155 shares against every 100 shares of IDFC. After the merger, IDFC First Bank's book value per share goes up by 4.9%.

IDFC's 39.93% stake in IDFC First Bank would be extinguished due to the merger. Vaidyanathan said every shareholder of IDFC, through the non-financial holding company structure, holds 1.66 shares in IDFC First Bank.

"Through this merger, we will issue 1.55 shares (for every share they hold). So, we will issue less number of shares than those cancelled," he said.

The merger of IDFC into IDFC First Bank has been a long-standing requirement for the group. While the Reserve Bank of India issued a banking licence to IDFC, one of the requirements was that the parent would cease to be the promoter of the bank after five years.

Is the swap ratio too much in favour of IDFC shareholders? Vaidyanathan does not think so.

"Our whole endeavour all the time should be, how to be fair to our shareholders. It is not about how to get the maximum, through any merger for that matter. It should be fair to IDFC First Bank shareholders and IDFC shareholders also," Vaidyanathan said.

"People should be happy coming into the IDFC First Bank operating company."

Watch the full conversation here: