IDFC Bank Ltd is all set to acquire Capital First Ltd in a share swap deal. Boards of the two entitties agreed to the deal in their respective meetings on Satturday. 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 between the two entities is estimated to be worth $1.5 billion (over Rs 9,541.57 crore).
Both the firms stated in a joint statement that the deal 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".
"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," IDFC Bank Managing Director and CEO Rajiv Lall said in a statement.
V Vaidyanathan, who is currently Chairman and MD of Capital First, will become the Chairman and Managing Director of the combined entity upon completion of the merger and necessary regulatory approvals. Lall will step into the role of non-executive chairman of IDFC Bank, subject to regulatory approvals after the merger is complete. He will replace Veena Mankar, who will remain on the board.
In the deal, Capital First will bring to the table a a retail lending franchise with a loan book of Rs 22,974 crore, as on September 2017, a live customer base of three million, and a distribution network in 228 locations across the country. 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 combined entity after the merger of IDFC Bank and Capital First will have an asset under management of Rs 88,000 crore, with profit after tax amounting to Rs 1,268 crore. The infrastructure under it will comprise of a distribution network comprising 194 branches, 353 dedicated BC outlets and over 9,100 micro ATM points, catering to a clientele of five million consumers. The deal, however, has to get the approval of Reserve Bank of India (RBI) and other maket regulators.
IDFC Bank and its parent IDFC Ltd last 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.