The stock of Infrastructure Development Finance Corporation (IDFC) went up 5 per cent on Friday, after the company’s board approved the demerger of its financial undertaking into a wholly-owned step-down subsidiary — IDFC Bank. This move is in line with the RBI’s norms for new banks to be set up through a financial holding company and to segregate all businesses carried out by a bank to the new entity. Accordingly, IDFC will transfer its financial undertaking, including related businesses of financing, project finance, fixed income, and treasury assets and liabilities to IDFC Bank.
In April this year, IDFC was granted ‘in-principle’ approval for starting a bank by the RBI. Shareholders will get one equity share of IDFC Bank for every share held in IDFC.
IDFC recently raised ₹1,000 crore of capital through a qualified institutional placement to bring down the foreign shareholding in the company, according to RBI’s regulations. As of September, foreign institutional holding is down to 47.6 per cent from 51.8 per cent in June.
IDFC is a leading lender in the infrastructure space and has thus been impacted by slowdown in the sector. In its September quarter results announced on Thursday, the company stated that its loan book stood at ₹54,851 crore — a 2 per cent decline over last year. The company’s net profit was down 14 per cent compared with the same period last year.