IDFC Bank, Capital First to merge; Vaidyanathan to head merged entity

IDFC Bank and Capital First have announced a merger between the two to form a combined entity with assets under management of Rs88,000 crore, branch network of 194 and customer base of over 5 million.

The boards of directors of IDFC Bank and Capital First at their respective meetings on Saturday approved the merger of the two.

As per the agreement, IDFC Bank will issue 139 shares for every 10 shares of Capital First.

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.

Capital First has all the while been thinking of becoming a bank, reports quoting its CEO Vaidyanathan said, adding that a banking licence would give access to a low-cost, stable funding base.

IDFC Bank had last year scrapped a deal to merge with Shriram City Union as the two could not arrive at a consensus on valuations.

For IDFC Bank, a merger with CAPITAL first brings high quality retail originating capability.

IDFC Bank's merger announcement also comes as a complete shift from its dedicated infrastructure financier to a strategy of "retailising" its business and becoming 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 Rs22,974 crore as of September 2017, a live customer base of three million and distribution network in 228 locations across the country. Post-merger, the combined entity of IDFC Bank and Capital First will have an AUM of Rs88,000 crore, after-tax profit of Rs1268 crore (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."