IDFC First Bank shares plummet 6% after merger announcement. Here's why
Shares of IDFC First Bank dropped by almost 6% during Tuesday's trading session, while shares of IDFC Limited increased by over 6%.
Shares of IDFC First Bank dropped by almost 6% during Tuesday's trading session, while shares of IDFC Limited increased by over 6%. This decline in IDFC First Bank's shares and the rise in IDFC Limited's shares were a result of the announcement regarding the proposed merger between the two companies. The swap ratio for the merger states that for every 100 shares of IDFC Limited with a face value of Rs 10, shareholders will receive 155 equity shares of IDFC First Bank with the same face value.
The swap ratio favored IDFC Limited, as per Nuvama, with a ratio of 1.55 compared to Nuvama Alternative's projection of 1.40 (worst-case scenario) and 1.60 (best-case scenario). IDFC First Bank's shares declined by 5.9% to a low of Rs 77.10 on the BSE, while IDFC Limited's shares initially surged by 6.04% to a high of Rs 115.70 but later settled with a 0.46% gain at Rs 109.60 per share. CLSA, following the merger announcement, has maintained an underweight rating on IDFC First Bank with a target price of Rs 85.
The merger process is expected to take around 12 to 15 months for completion. This news comes after the recent merger between Housing Development Finance Corp Ltd and HDFC Bank, which was valued at $40 billion, making it the largest merger in India's corporate history.
What's Your Reaction?
