In addition to approving the merger of the two companies, the boards of directors of IDFC and IDFC Financial Holding also announced an exchange of 155 shares of IDFC FIRST Bank for every 100 shares of IDFC.

IDFC Limited, although publicly traded, is predominantly held by the government, along with a mix of mutual funds, foreign investors, and large domestic institutions. In this News Explained podcast, Nabodita Ganguly is joined by Hamsini Karthik, Senior Assistant Editor who talks about the merger in-depth.

IDFC Limited recently sold its AMC business, leaving the bank as its primary asset. This transaction has emphasised the fact that IDFC Limited’s financial strength heavily relies on the performance of IDFC First Bank. Consequently, there is not a significant holding company discount involved in this merger. The executives and bankers at IDFC Limited, including Chairman Anil Singhvi, have worked diligently to secure a favourable deal in this process. However, it’s important to note that while the merger is advantageous to the government and IDFC Limited shareholders, it could have been even better.

Now, what does all this mean for customers? Well, if you have an account with IDFC Bank, you don’t need to worry about the merger’s implications. Your banking experience will continue, as usual, unaffected by these changes. The divestment of the mutual fund business has already been completed, and your day-to-day banking operations remain unchanged.

On the other hand, investors may experience more significant changes. The merger has been driven by the demands of IDFC Limited shareholders, who were dissatisfied with the company’s lack of value. The merger addresses their concerns by addressing the issue of value erosion and providing access to IDFC First Bank shares, which have performed well recently.

Looking ahead, the possibility of more bank mergers cannot be ruled out. Promoters have been granted permission to increase their stakes, indicating a favourable environment for corporate action. Several other banks have also expressed their intentions for mergers and acquisitions.

However, it is unlikely that we will see large-scale bank mergers similar to the HDFC Bank and HDFC Limited merger, except for IDBI Bank. The current system is not yet conducive to such mergers. Listen in.