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IDFC Bank scrapped a deal to merge with Shriram City Union last year as the two could not arrive at a consensus on valuations.
IDFC Bank and Capital First today announced merger between the two to form a combined entity with assets under management of Rs 88,000 crore, branch network of 194 and customer base of over 5 million. As per the agreement, IDFC Bank will issue 139 shares for every 10 shares of Capital First.
The boards of directors of IDFC Bank and Capital First at their respective meetings held today approved a merger of Capital First with IDFC Bank.
V Vaidyanathan, currently Chairman and MD of Capital First, will succeed Rajiv Lall as MD and CEO of the combined entity upon completion of the merger and necessary regulatory approvals.
This announcement 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, and in line with Capital First’s stated intention and strategy to convert to a universal bank.
Capital First brings with it a retail lending franchise with a loan book of Rs 22,974 crores as on September 2017, a live customer base of three million customers; and a distribution network in 228 locations across the country. Post-merger, the combined entity of IDFC Bank and Capital First will have an AUM of Rs 88,000 crores; PAT of Rs 1268 crores (FY 17); and a distribution network comprising 194 branches (as per branch count of December 2017 of both entities), 353 dedicated BC outlets and over 9,100 micro ATM points, serving more than five million customers across the country.
“We believe this merger will be transformational for IDFC Bank,” said Rajiv Lall. “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. Vaidya has built a terrific franchise and team. He comes with a proven track record, the right experience and the leadership skills to firmly establish the combined entity amongst the highest echelons of Indian banking.”
Post-merger Lall will step into the role of non-executive Chairman of IDFC Bank and guide the transition process. He will replace Ms. Veena Mankar who will remain on the Board.
“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,” said Vaidyanathan. “We are excited about this merger because IDFC Bank provides a perfect platform for continued growth of the combined franchise, supported by low-cost funding.”
Warburg Pincus owns 36% in Capital First which is primarily into lending to small and medium enterprises. The market capitalization of Capital First ten-fold since the buyout in March 2012 from Rs. 780 crores to over Rs. 8000 crores.
“A merger with the IDFC platform that has been built by Rajiv and his team creates a powerful combination,”said Vishal Mahadevia, Head Warburg Pincus India 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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