IDFC First Bank and IDFC Share Surge as Merger Deal Receives Exchange Approval

In early morning trade on November 15 IDFC First Bank's shares rose nearly 1% higher on the National Stock Exchange (NSE). The boost came after the bank received 'no observation' letters from the NSE and BSE regarding the proposed amalgamation of IDFC Limited and IDFC Financial Holding Company Limited into IDFC FIRST Bank Limited.

The regulatory filing made by IDFC First Bank on November 14 disclosed the positive response from the National Stock Exchange of India Limited, which issued an 'observation letter with no objection,' and the Bombay Stock Exchange Limited, which provided an 'observation letter with no adverse observations' regarding the merger.

This development follows the approval granted by the Competition Commission of India (CCI) on October 17, further solidifying the path for the amalgamation. The decision to merge was initially made during a board meeting on July 3. As a part of the merger agreement, the share-exchange ratio has been set at 155 equity shares with a face value of ₹10 each of IDFC First Bank for every 100 equity shares of face value ₹10 each of fully paid-up IDFC Limited.

The positive market response was reflected in the share prices, with IDFC's shares registering a gain of approximately 1.3%, reaching ₹120.45. Simultaneously, IDFC First Bank's shares were trading at ₹87.10 around 10 am.

Financial Highlights for Q2 2023

In addition to the merger progress, IDFC First Bank reported impressive financial results for the quarter ending September 2023. Net profit increased 35% year-on-year, reaching ₹751 crore. The core operating profit for the same period recorded growth of 38%, amounting to ₹1,456 crore.

Net interest income (NII) saw a commendable surge, reaching ₹3,950 crore, marking a remarkable 32% increase from the previous fiscal. The net interest margin for the same period also showed improvement, standing at 6.32% compared to 5.83% in the previous fiscal.

Stock Performance

As of the current moment, IDFC shares are trading at ₹120.70. However, over the past month, the stock has experienced a marginal downturn, reflecting a decrease of nearly 4%. Zooming out to a six-month timeframe provides a more positive perspective, with IDFC stock showing a commendable rise of 31%. This upward trend gains even more significance when we extend our analysis to a one-year horizon, where the stock exhibits an impressive growth of 50%.

Looking back over the past five years, IDFC stock stands out as a lucrative investment, yielding an exceptional 200% return for its investors. This impressive gain not only highlights the stock's resilience but also highlights its capacity to generate returns for those who have maintained their investments over an extended period.

On the technical front, IDFC's share price reached a peak of approximately ₹136 per share in September 2023. However, since then, the stock has witnessed profit booking, reaching a low point of ₹112 on November 1, 2023. Following this dip, the stock has exhibited a recovery of approximately 8%, indicating a bullish momentum on the daily time frame.

This recent price movement suggests a resurgence in investor confidence, with the stock showing signs of upward momentum. The recovery from the November low points to a positive sentiment prevailing in the market, potentially attracting further interest from traders and investors alike.

Final Words

With the merger gaining key approvals and the bank demonstrating strong financial performance, IDFC First Bank is poised for further growth. Investors are closely monitoring the ongoing developments as the bank continues to navigate the complexities of the amalgamation, setting the stage for a new chapter in its corporate trajectory.