IDFC Share Price : The Indian financial sector witnessed a significant development on July 4, as shares of IDFC (Infrastructure Development Finance Company) rose by 6 percent to reach a fresh 52-week high of ₹115.70. Simultaneously, shares of IDFC First Bank declined by 6 percent during morning trade on the Bombay Stock Exchange (BSE). This drop in the bank’s share price came a day after the board of IDFC First Bank approved its merger with IDFC.
IDFC Share Price : A Positive Start and Fluctuating Performance
IDFC Share Price : The trading session on July 4 began with IDFC’s share price opening at ₹115.40, surpassing the previous day’s closing price of ₹109.10. The stock then continued its upward trajectory, climbing by 6 percent to reach a 52-week high of ₹115.70. On the other hand, IDFC First Bank’s share price opened flat at ₹81.94, remaining unchanged from the previous day’s closing price.
However, as the trading session progressed, the bank’s shares experienced a decline of 6 percent, reaching an intraday low of ₹77.10.
The initially positive performance of IDFC shares was short-lived, as they soon relinquished all their gains and traded 0.14 percent lower at ₹108.95 around 9:45 am. Simultaneously, shares of IDFC First Bank faced a more substantial decrease of 5.09 percent, settling at ₹77.77.
IDFC Share Price : The Merger Approval and Its Implications
IDFC Share Price : The merger between IDFC and IDFC First Bank was officially approved by the board of IDFC First Bank on July 3, through an amalgamation scheme. The agreed-upon exchange ratio for the merger is 155:100, which means that shareholders of IDFC Ltd will receive 155 shares of IDFC First Bank for every 100 shares held in the former.
The proposed merger aims to simplify the corporate structure of IDFC First Holdings Ltd (FHCL), IDFC Limited, and IDFC First Bank by consolidating them into a single entity. This consolidation will streamline the regulatory compliances of the involved entities.
IDFC Share Price : Financial Figures and Expert Opinions
IDFC Share Price : As of March-end, IDFC First Bank reported total assets worth ₹2.4 lakh crore and a turnover of ₹27,194.51 crore. For the fiscal year 2022-23, the bank recorded a net profit of ₹2,437.13 crore. On the other hand, IDFC Ltd had total assets amounting to ₹9,570.64 crore and a turnover of ₹2,076 crore.
Global brokerage firm CLSA maintains an ‘underperform’ view on IDFC First Bank, with a target price of ₹85. However, the firm sees the swap ratio for the proposed merger as relatively positive for IDFC shareholders. It notes that the share count of IDFC First Bank will decline by 2.5 percent, while the book value per share (BVPS) will rise by 4.9 percent.
Domestic brokerage firm Nuvama Alternative & Quantitative Research believes that IDFC First Bank is the top probable contender for inclusion in the MSCI August 2023 Standard Index. The firm predicts that the stock, currently priced at ₹81.7 per share, needs a 4 percent increase (around ₹85 per share) by the third week of July to meet the inclusion criteria. Once included, the stock could potentially experience an inflow of $170 to $180 million.
Nuvama further states that the proposed merger, with an expected completion timeframe of 12 to 15 months, will not impact the bank’s chances of inclusion. However, the only potential hurdle could be the stock failing to meet the price cut-off level requirement.
Conclusion
The approval of the merger between IDFC and IDFC First Bank has generated mixed market reactions. While shares of IDFC witnessed a significant increase, IDFC First Bank experienced a decline in share price. The proposed merger aims to simplify the corporate structure and streamline regulatory compliances. Expert opinions vary, with CLSA maintaining an ‘underper form’ view on IDFC First Bank, while Nuvama Alternative & Quantitative Research sees it as a potential candidate for inclusion in the MSCI August 2023 Standard Index.
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FAQs
What led to the rise in shares of IDFC?
The surge in IDFC’s share price can be attributed to the approval of its merger with IDFC First Bank.
Why did shares of IDFC First Bank decline?
The decline in IDFC First Bank’s share price can be attributed to the market’s response to the merger approval.
What is the expected timeline for the merger completion?
The proposed merger between IDFC and IDFC First Bank is expected to be completed within 12 to 15 months.
How will the merger impact IDFC shareholders?
IDFC shareholders will receive 155 shares of IDFC First Bank for every 100 shares they currently hold.
Is IDFC First Bank likely to be included in the MSCI August 2023 Standard Index?
According to Nuvama Alternative & Quantitative Research, IDFC First Bank is a top contender for inclusion in the index, subject to meeting certain criteria.