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The soon-to-be-turned private bank IDFC will be headed by its current Executive Chairman Rajiv Lall.
Subject to RBI approval, Rajiv Lall will be the Managing Director and Chief Executive Officer of IDFC Bank, which is expected to be formed by October 2015, confirmed Sunil Kakar, Group CFO of IDFC.
IDFC Bank will be a listed entity from day one of operations and the existing shareholders of IDFC will be given an equivalent number of shares in the bank.
The demerger of IDFC and IDFC Bank is to be completed within six-nine months, and a large part of its assets will be transferred to the bank, Kakar said.
Vikram Limaye, Chairman at IDFC, said IDFC would bring down foreign shareholding to below 50 per cent, in line with regulatory norms. The foreign shareholding has been reduced to 51.7 per cent from 54.5 per cent a year before due to natural dilution.
“About 3.7-4 per cent dilution will be needed to bring the ownership of foreigners to below 50 per cent if it does not come down naturally," Limaye said.
The dilution will be to the tune of Rs 850 crore. IDFC will try to find domestic buyers and could end up raising capital.
According to Limaye, IDFC is aware of the risks surrounding infrastructure and was, therefore, prudent to focus on lower risk opportunities for growing its business.
IDFC reported a 14 per cent drop in net profit on Tuesday. Currently, infrastructure accounts for over 90 per cent of its business, which will be moderated downwards over time.
“We are keen on moving from an incurred loss to an expected loss model of business,” Kakar added.
Also about 85 per cent of the restructuring is from the energy and power sector. Given the circumstances, the restructuring will change later, but until things change on the ground, the asset quality will remain at these levels, Kakar said.
IDFC's restructuring increased to 5.3 per cent of total assets.
Limaye said it is slowing its loan book to be cushioned against any uncertainty in the first year of forming the bank.
In terms of the RBI circular on allowing banks to raise long-term bonds, Limaye said IDFC is seeking further clarity on how it will be applicable from now to October 2015 as it is in the process of turning into a bank. "Though this will be positive for us," he added.
Being in transition to a bank, IDFC is looking at people, products, processes and technology.
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