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To fast-forward its vision of becoming a mass retail bank, IDFC Bank is looking at a business combination with two Shriram Capital-promoted non-banking finance companies — Shriram Transport Finance Corporation (STFC) and Shriram City Union Finance (SCUF).
The market seems to have got a whiff of this development with the share prices of IDFC Bank, its parent IDFC and the two non-banking finance companies from the Shriram Group running up over the past one week.
“The combination is value accretive in the long term. Merging the two NBFCs with IDFC Bank will help the latter grow its retail portfolio while the former will benefit from access to low-cost funds,” said an analyst with a broking firm.
Last year, in a bid to give a leg-up to its vision of becoming a mass retail bank, IDFC Bank acquired Grama Vidiyal Micro Finance Ltd (now renamed IDFC Bharat Ltd).
This company had ₹1,502 crore of assets under management (AUM), 319 branches in seven States and over a million customers.
In its annual report, the private sector bank said: “To develop into a mass retail bank, your bank aims to accelerate the pace of retail lending and retail liability acquisition.
“In order to achieve this, your bank plans to double the share of its retail book, systematically bring down the proportion of the corporate funded book, and further reduce exposure to infrastructure over the next two to three years.”
Of the outstanding credit of ₹85,172 crore as at March-end 2017, IDFC Bank’s retail portfolio amounted to ₹16,818 crore or 20 per cent.
As at March-end 2017, the bank had 74 branches, 47 ATMs, 350 corporate Business Correspondent branches (which include NBFCs and finance companies representing IDFC Bank for micro-lending) and 8,142 outlets, which include micro ATMs, cashless PDS outlets and Aadhaar Pay merchant points.
STFC operates through a pan-India network of 918 branch offices and 854 rural centres. As of March-end 2017, its AUM stood at ₹78,761 crore.
SCUF operates through a pan-India network of 998 branches. As of March-end 2017, its AUM stood at ₹23,132 crore.
Statements by entitiesIDFC and IDFC Bank issued identical statements: “We keep evaluating opportunities from time to time and should anything concrete fructify, we will inform the exchanges as appropriate. At this point, there is nothing that can be disclosed.”
STFC and SCUF too issued identical statements:“…as part of corporate strategy, the company continuously evaluates various opportunities for enhancing stakeholders’ value.
“As and when such proposals are considered by the board of directors of the company warranting disclosures, the company shall comply with the disclosure obligations under SEBI regulations.”
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