There is little progress on the proposed merger of IDFC First Bank and its ultimate holding company IDFC Limited. Highly placed sources say that after the preliminary exchange of consent, the bank is yet to hear about the valuations or the modalities of the merger from IDFC Limited, pushing the earlier slated timeline (FY23) by a fiscal to FY24.
“The holding company is yet to revert on the matter,” said the person cited above.
In October 2021, IDFC Limited, through its step-down subsidiary - IDFC Financial Holding Company Limited which holds 36.51 per cent stake in IDFC First Bank, sought the bank's consent for merger, to which the bank agreed in December 2021. However, there has been no progress since then.
One of the key reasons holding back the merger is the delay in hiving off IDFC Asset Management Company (AMC). Sale of this subsidiary by IDFC Limited is essential to secure the go-ahead from the Reserve Bank of India, which lately is clamping down on non-banking subsidiaries owned and operated by banks.
Sources say that IDFC is in discussion with UTI AMC for a potential deal, though it is more like a fallback option for now.
“IDFC is keen on garnering a valuation of 5-6 per cent of AUM for its AMC business. However, with 75 per cent of its business is generated by debt funds, buyers aren’t budging beyond a price of 3 per cent of AUM”, said a person aware of the development. “Fintech who needs AMC license or looking to augment their base have been approached by IDFC as they may be willing to offer the valuations sought”.
However, in case even if these talks don’t materialse, IDFC will engage closely with UTI.
Email sent to IDFC First Bank and UTI AMC remained unanswered till press time. IDFC Limited could not be reached for comments.
With ₹1.25 lakh crore of assets under management as on December 31, 2021, and an overall market share of 3.3 per cent, Citigroup Global Markets to lead the sale of IDFC AMC.
Meanwhile, to trim down its corporate structure before it can proceed with the merger, IDFC's board approved the amalgamation of three of its subsidiaries - IDFC Alternatives Limited, IDFC Trustee Company Limited and IDFC Projects Limited into IDFC Limited.