IDFC Bank, Capital First announce merger, share swap ratio at 139:10

V Vaidyanathan

The boards also approved a share swap ratio of 139 shares of IDFC Bank for 10 shares of Capital First.

The boards of the IDFC Bank Ltd. and Capital First Ltd., today, approved a merger between themselves.

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.

The merger ties in the long-stated intent of the principals - of IDFC Bank wanting to get into retail and of Capital First desirous of turning into a universal bank.

IDFC Bank and its parent IDFC Ltd previous year announced talks to acquire some of Shriram Group's financial services businesses but the deal fell through due to disagreement on a share swap ratio.

IDFC Bank shares closed 1.31 per cent down at Rs 67.65 on Friday, valuing the company at Rs 23,000 crore.

Rajiv Lall, now the CEO of IDFC Bank, will move into the role of an executive chairman, replacing Veena Mankar, who will continue on the bank's board.

"The merger will bring two tech savvy, culturally aligned platforms together to create a diversified and fast growing universal bank with a national footprint, " Lall said. The combined entity will have a diversified portfolio across corporate lending, SMEs and retail loans.

Capital First, owned more than a third by private equity firm Warburg Pincus, also counts Singapore state investor GIC among its major investors. He will replace Veena Mankar who will continue to remain on the board. The deal, however, has to get the approval of Reserve Bank of India (RBI) and other maket regulators. The combined entity will have a profit after tax of Rs 12.7 billion as on FY17, a distribution network of 194 branches, 353 business Correspondent outlets.

Vaidyanathan said: "On our part, we have always said publicly that a banking platform provides a stable diversified liability base and is hence critical for building a large franchise". The market capitalization of Capital First ten-fold since the buyout in March 2012 from Rs 780 crore to over Rs 8,000 crore.

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