IDFC - At the End of the Demerger Lies Opportunity

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Special Situations, Content Strategist, Smartkarma

Crispin Francis

Special Situations, Content Strategist

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

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On 30 October 2014, the Board of Directors of IDFC Limited&nbsp;<a href="http://www.idfc.com/pdf/IDFC%20Limited%20-%20Demerger%20Intimation%20to%20Stock%20Exchange%20under%20Clause%2036%20of%20Listing%20Agreement.pdf" target="_blank">announced</a>&nbsp;that they have approved a proposal to demerge its Financial Undertaking into its wholly owned step down subsidiary IDFC Bank Limited ("IDFC Bank").Upon the Scheme becoming effective,&nbsp;IDFC Bank will be listed on the NSE and BSE.IDFC Limited will remain listed on the NSE and BSE.&nbsp;Shareholders of IDFC Limited will continue to hold their shares in IDFC Limited while receiving one share in IDFC Bank for each share held in IDFC Limited on the Record Date.IDFC Limited will own exactly&nbsp;53 % of the bank and 47 % will be held directly by the existing shareholders.The de-merger is needed as a requirement to receive the&nbsp;<a href="https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30931" target="_blank">banking license from RBI</a>;&nbsp;IDFC Limited received the in-principal approval back in April 2014.This structure would cause IDFC Bank to have a majority shareholder&nbsp;who is a listed company (IDFC Limited). IDFC Limited would become Holdco which would likely suffer from a discount due to the inefficiency in the new structure.The reason for having this complex structure is due to D (ii) of the RBI's&nbsp;Guidelines for Licensing of New Banks in the Private Sector. It is not something that they could have avoided.

On 30 October 2014, the Board of Directors of IDFC Limited&nbsp;announced&nbsp;that they have approved a proposal to demerge its Financial Undertaking into its wholly owned step down subsidiary IDFC Bank Limited ("IDFC Bank").Upon the Scheme becoming effective,&nbsp;IDFC Bank will be listed on the NSE and BSE.IDFC Limited will remain listed on the NSE and BSE.&nbsp;Shareholders of IDFC Limited will continue to hold their shares in IDFC Limited while receiving one share in IDFC Bank for each share held in IDFC Limited on the Record Date.IDFC Limited will own exactly&nbsp;53 % of the bank and 47 % will be held directly by the existing shareholders.The de-merger is needed as a requirement to receive the&nbsp;banking license from RBI;&nbsp;IDFC Limited received the in-principal approval back in April 2014.This structure would cause IDFC Bank to have a majority shareholder&nbsp;who is a listed company (IDFC Limited). IDFC Limited would become Holdco which would likely suffer from a discount due to the inefficiency in the new structure.The reason for having this complex structure is due to D (ii) of the RBI's&nbsp;Guidelines for Licensing of New Banks in the Private Sector. It is not something that they could have avoided.

IDFC の分割 - 提案された構造は非効率的ですが、実行する必要があります。

IDFC Ltd

IDFC の分割 - 提案された構造は非効率的ですが、実行する必要があります。