IDFC Bank, Capital First gain up to 7% as NCLT approves merger

Shares of IDFC Bank and Capital First have moved higher by up to 7% on the BSE after the National Company Law Tribunal (NCLT) approved their merger.

“Approval of the National Company Law Tribunal to the composite scheme of amalgamation of Capital First, Capital First Home Finance and Capital First Securities with IDFC Bank and their respective shareholders and creditors,” IDFC Bank said in a regulatory filing.

As on January 13, 2018, the boards of directors of IDFC Bank and Capital First at their respective meetings approved a merger of Capital First with IDFC Bank.

The merger was 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.

V. Vaidyanathan, currently the 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, IDFC Bank said.

In the merged entity, the size of the wholesale book is set to be much higher considering the large corporate book of IDFC Bank. Also, the smaller ticket corporate loans are likely to drive the future retail lending growth.

“While the merger may result in some near term operational headwinds, we believe that the growth prospects as well as profitability may only improve, backed by a combination of lower cost of funds (coming from deposits in the bank) and higher yields of the retail loans from Capital First’s book along with the robust growth in IDFC Bank’s retail assets,” analyst at Centrum Broking said in November report.

At 03:14 pm; Capital First was trading 6% higher at Rs 548, after surging 7% to Rs 554 on the BSE in intra-day trade. IDFC Bank was up 5% at Rs 39.55, gaining 6% to Rs 40.05 in intra-day trade on back of 1.5 times rise in total combined volumes on the BSE and NSE.

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