IDFC First Bank joins IDFC in green on second day after companies announce merger

IDFC and IDFC First Bank shares rose on Wednesday, a day after the news of a merger between the companies triggered a mixed impact on both stocks. IDFC First Bank and IDFC shares registered gains to the tune of one per cent each in early deals. IDFC First Bank shares rose by as much as Re 0.65 to Rs 79.3 apiece on BSE, recovering much of the steep losses the previous day, and IDFC shares gained by Rs 2.3 at the strongest level of the day so far to touch Rs 113. 5 apiece. 

On Tuesday, IDFC First Bank said it had its board's nod to merge its operations with IDFC and IDFC Financial Holding. IDFC said the proposed IDFC-IDFC First Bank deal would create value for its shareholders and provide direct shareholding in IDFC First Bank. 

Currently, IDFC, through its subsidiary IDFC FHCL, holds a 39.93 per cent stake in IDFC First Bank.

The announcement took IDFC shares to a record high but triggered selling pressure on IDFC First Bank. The stocks closed 1.9 per cent higher and four per cent lower on Tuesday respectively. 

As part of the proposed IDFC-IDFC First Bank merger, investors will get 155 IDFC First Bank shares for every 100 shares held in IDFC, according to a regulatory filing. According to analysts, the share-swap ratio proposed under the merger is likely to be beneficial for IDFC shareholders. 

IDFC said the merger is subject to approvals from stock exchanges, the RBI, the CCI and shareholders. 

ALSO READ: IDFC-IDFC First Bank merger explained 

The announcement marks the first big consolidation in the country's banking space after the HDFC twins completed the process of amalgamation between them to create one of the biggest financial institutions in the world. The HDFC-HDFC Bank merger is the biggest in the country's corporate history. 

CLSA maintained its 'underperform' rating on IDFC First Bank with a target of Rs 85 after the news, implying upside potential of 3.7 per cent from Monday's price.Morgan Stanley retained 'equal-weight' on the stock with a target price of Rs 80. 

(This story will be updated shortly)

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