AMALGAMATION

Of
IDFC BANK AND CAPITAL FIRST
TEAM I
Prerna Jatla -1073
Janvi Mogra - 1970
Vasundhra Mittal - 1974
Naisha Yadav - 1993
Dibyani Dash - 2078
 AMALGAMATION

Amalgamation
blending of two or more existing
companies to form a new
company
External
Absorption
Reconstruction
takingover of one or more existing
formation of a new company to
comapanies by another existing
take over an existing company
comany

A Ltd.
A Ltd. + B ltd. A Ltd. + B ltd.

B ltd.
C ltd. A ltd.
(where B is the transferor Co. and A is
(where A is the transferor Co.
(where A and B are transferor
the transferee Co.) and B is the transferee Co.
Co. and C is the transferee Co.)

Note: old comany= transferor company ; new company= transferee company

PURCHASE CONSIDERATION:
According to AS-14, "Consideration for amalgamation means the aggregate of the shares and other securities issued and the
payment made in the form of cash or other assets by the transferee company to the shareholders of the transferor
company."
Now, there are two methods of calculating purchase consideration:

NET ASSET METHOD: PAYMENT METHOD:

Asset of old company taken by the new company at To (Old Co.) In (New Co.) Calculation Amount
market value: XXX
--Equity Shares - Cash XXX XXX
(-) Liabilities of old company taken by the new
-Preference Shares - Equity Shares XXX XXX
company at market value: XXX
- Preference Shares XXX XXX
Purchase Consideration: XXX - Debentures XXX XXX

Swap Ratio = Old Ratio : New Ratio

Amalgamation can be in the nature of merger or in the nature of purchase:
In the nature of
merger
Amalgamation in the nature of merger is the
amalgamation where there is genuine pooling not
merely of the assets and liabilities of the transferor
and transferee companies but also of the
shareholders' interest of the businesses of the
companies.
The assets and the liabilities of the transferor
company become the assets and liabilities of the
transferee company after amalgamation.
Equity shareholders holding not less than 90%
of the face value of the shares become equity
shareholders of the transferee company.
in the nature of
purchase
Amalgamations in the nature of purchase is that
amalgamation which is in effect a mode by which
one company acquires another company and as a
consequence the shareholders of the company
which is required normally do not continue to have a
proportionate share in the equity of the combined
company.
The assets and the liabilities of the transferor
company are not taken over by the transferee
company after amalgamation.
Equity shareholders holding not less than 90% of
the face value of the shares do not become equity
shareholders of the transferee company.
In the nature of
merger
The consideration for the amalgamation
receivable by those equity shareholders of the
transferor company who agree to become equity
shareholders of the transferee company is
discharged by the transferee company wholly by
the issue of equity shares in the transferee
company except that cash may be paid in the
respect of fractional shares.
The business of the transferor company is
intended to be carried on by the transferee
company after the amalgamation
The assets and liabilities of the transferor company
are recorded at book values.
in the nature of
purchase
All equity shareholders of the transferor
company are paid a certain amount of cash per
share in addition to or in place of equity shares
of transferor company and the payment in
cash is not in respect of any fractional shares.
The business of the transferor company is not
intended to be carried on by the transferee
company after the amalgamation.
The assets and liabilities of the transferor
company are not recorded at book values,
except for the uniformity of accounting
policies.
MERGER OF IDFC BANK
AND NBFC CAPITAL FIRST:
 CAPITAL FIRST HISTORY

Capital First Ltd. was an Indian non-banking financial institution providing debt financing to
small entrepreneurs, MSMEs (Micro, Small and Medium Enterprises) and Indian consumers.
Capital First was founded in 2012 by V. Vaidyanathan.

The company was initially listed on the Indian Stock exchanges in January 2008
as Future Capital Holdings.
 Between 2008 and 2010, the company launched a number of diverse businesses including
financing real estate developers, corporate credit, asset management, foreign exchange
business (through joint venture arrangement), retail broking business (through joint venture
arrangement), wealth management and property services.

In 2013–14, the company received the Housing Finance Company (HFC) License from
National Housing Bank (NHB) for its wholly owned subsidiary Capital First Home Finance
Limited. Capital First also launched new products like SME business loans, personal
loans, and affordable housing, and scaled up the existing businesses.

Between 2014 and 2017, Capital First raised significant funding through investments from PE
players and Qualified Institutional Placements.Many reputed financial institutions across the
world likeAshburton Limited, BNP Paribas Asset Management have invested in Capital First
during this phase through secondary market and became shareholders of the company.
 IDFC HISTORY
FORMATION OF IDFC BANK

In 2014, the Reserve Bank of India granted approval to IDFC Limited to set up a new bank in the
private sector. Following this, IDFC Limited divested its infrastructure finance assets and liabilities to
a new entity - IDFC Bank.

IDFC Bank started operations on 19 October 2015, with 23 branches all over India which increased to
600 in the following years

Over the following three years, the Bank developed a strong framework, including strong IT
capabilities for expanding banking operations. The Bank designed an efficient treasury management
system for its own proprietary trading, as well as for managing client operations. The bank started
building Corporate banking businesses.
WHAT LED TO MERGER ?

Recognizing the change in the Indian landscape, emerging risk in infrastructure financing, and the
low margins in corporate banking, IDFC Bank launched retail business for assets and liabilities and
put together a strategy to retailize its loan book to diversify and to increase margins.

Since retail required specialized skills, seasoning, and scale, the Bank was looking for
inorganic opportunities for merger with a retail lending partner who already had scale,
profitability and specialized skills.

Capital First, in the meanwhile, was on the lookout for a commercial banking license in
order to access large pool of funds for growth and to access low cost of funds.
 MERGER OF IDFC LTD. AND CAPITAL FIRST

After a failed bid for merger with Shriram Group due to valuation differences and structuring issues, IDFC
Bank decided to merge with NBFC Capital First.
In January 2018, IDFC FIRST Bank and Capital First announced that they had reached an understanding
to merge with each other to form IDFC First Bank where :
Shareholders of Capital First were issued 139 shares of the merged entity for every 10 shares held
in Capital First.
V. Vaidyanathan, founder, and chairman of Capital First Ltd, was appointed as the Managing
Director and Chief Executive Officer of the merged entity.
Rajiv Lall, Founder MD & CEO of IDFC Bank, was appointed as part-time non-executive chairman.

This merger gave Capital First management access to a bank platform, and its product mix and customer
profile fits well into the banking fold and will have access to low-cost funding avenues.
IDFC Bank's goal to retailise its business and Capital First’s to transform into a universal bank could be
achieved through the merger. Strategically, it was a step in the right direction.
 TIMELINE OF IDFC FIRST BANK
IDFC LTD was incorporated IDFC Bank amalgamated with
as a public limited NBFC Capital First to form a
company on January 30, new entity IDFC First 0n Dec
1997 18,2018

1997 2015 2018

IDFC Bank(private sector bank)

was formed through the
demerger of IDFC LTD. in 2015.
 O
B F
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N
E M
F E
I R
T G
E
S R
 BENEFITS OF MERGER
WIDER CUSTOMER MARKET
IDFC First Bank will offer a wider
array of retail and wholesale
banking products, services and
digital innovations, to a greater
number of customer segments,
after the merger. The bank will
serve 7.2 million customers
through its 203 bank branches,
129 ATMs, 454 rural business
correspondent centres across
the country’s urban and rural
geographies.
UNIVERSAL BANK
The merger presents an
incredible opportunity to
IDFC First Bank to
strengthen banking
capabilities, operate as a
larger universal bank and
bring immense benefits
to it's customers.
 ANALYSIS Amt. in Rs. '00'00'000

CAPITAL FIRST IDFC BANK IDFC FIRST BANK

EQUITY & LIABILITIES March 2018 March 2018 March 2019

SHARE CAPITAL 98.97 3,404.07 4,781.68

RESERVES AND
2451 11,852.46 13,377.59
SURPLUS

LONG TERM
13536.27 57,287.07 69,983.39
BORROWINGS
 ANALYSIS
IDFC FIRST Bank has a renewed focus on retail business with an
intent to fast-forward its growth trajectory, and to serve many
more customer segments that are growth-drivers of the Indian
economy. The merger sets the stage for the creation of a
financially and strategically stronger entity. The combined
customer base is now 7.3 million and growing.

PURCHASE CONSIDERATION
The merger between the two entities was announced on
January 13, 2018. As part of the merger agreement,
shareholders will receive 139 shares of IDFC Bank for each 10
shares held of Warburg Pincus-backed Capital First.
 ANALYSIS
As a part of the merger , combined entity will have assets
under management of Rs 88,000 cr and branch network of
194 serving over five million customers.

Profit after tax (PAT) of Rs 1,268 crores and a distribution

network of 194 branches , 353 dedicated business
correspondent outlets and over 9,100 micro ATM points.
Thankyou