IDFC Bank, Capital First announce merger, get board approval

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V Vaidyanathan, founder and Executive Chairman of Capital First will become the MD and CEO of the merged entity. A joint statement said that the decision was in line with the bank's strategy of "retailising" its business and with Capital First's stated intention to convert to a universal bank. Under the deal, IDFC bank, one of the two newest banks of India, has agreed to give 139 shares for every 10 shares of Capital First, a debt financing firm for small entrepreneurs. The deal is conditional on central bank and other regulatory approvals. Capital First, owned more than a third by private equity firm Warburg Pincus, has Singapore state investor GIC among its list of major investors. The deal between the two entities is estimated to be worth $1.5 billion (over Rs 9,541.57 crore). When IDFC Bank commenced operations in 2015, Dr. Lall had stepped down from IDFC Ltd., where he was executive chairman, to head the bank.

The merger is expected to help the bank cash in on Capital First's 3 million retail and small & micro-enterprise customers base.

"The number of products that we can offer to our customers would be much larger, the product suite can be more and the balance sheet of the IDFC Bank is more diversified because of the retail presence".

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"The Board of Directors of IDFC Bank Ltd. have considered and approved a composite scheme of amalgamation of Capital First Ltd, Capital First Home Finance Ltd and Capital First Securities Ltd". "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". 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. "We are excited about this merger because IDFC Bank provides a flawless platform for continued growth of the combined franchise, supported by low-priced funding".

As of Friday's closing, shares of Capital First rose 0.05 percent to Rs 835.90 and those of IDFC Bank fell 1.3 percent to Rs 67.65. "We are excited about the opportunity to be part of something special here, and look forward to supporting Vaidya and the teams at Capital First and IDFC Bank as they grow the platform into a leading banking institution in the country".

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