IDFC First Bank Shares Plunge 6% While IDFC Soars After Merger Announcement: Here’s the Explanation

IDFC- IDFC Bank  junction The share  exchange  rate was in favour of IDFC, Nuvama said adding that the  exchange  rate equates to1.55 while Nuvama Alternative was  erecting in1.40( worst case  script) and1.60( stylish case  script ).

IDFC FIRST BANK

After the announcement of the merger, there was a 6% decrease in the shares of Bank, while there was an increase in IDFC Limited. Here’s why:

On the BSE, Bank’s shares fell by 5.9% and reached a lower level of Rs 77.10. On the other hand, in early trading,shares rose by 6.04% and reached a highest level of Rs 115.70. However, they later decreased by 0.46%.

In Tuesday’s trading, there was a decline of approximately 6% in the shares of IDFC First Bank, while IDFC Limited’s shares increased by more than 6% after the announcement of the proposed merger swap ratio, which is seen in favor of shareholders.

For the merger between Bank and IDFC Limited, the share exchange ratio will be 10 equity shares of Bank, valued at Rs 10 each, for every 155 equity shares of IDFC Limited, valued at Rs 10 each.

The share swap ratio favored IDFC Limited, as Nuvama stated that the swap ratio was 1.55, while Nuvama’s alternative was 1.40 (worst-case scenario) and 1.60 (optimum scenario).

On the BSE, Bank’s share fell by 5.9% and reached a lower level of Rs 77.10. On the other hand, in early trading, IDFC’s shares rose by 6.04% and reached the highest level of Rs 115.70. Later, they reached Rs 109.60 with a 0.46% increase. CSLA has maintained its underweight stance on Bank with a target of Rs 85 after the news of the merger.

“We hope that the spread will narrow at the start of Wednesday’s trading, so we will recommend any spread trade only when the spread merger closure timeline is at a sufficient level. Hypothetically, if the spread is available at 13-14%, it is a good level for entry, but it doesn’t seem likely,” Nuvama stated in a note.

The news of the merger between IDFC and IDFC First Bank came a few days after the deal with HDFC Bank in a $40 billion deal by Housing Development Finance Corporation Limited, which was the largest deal in India’s corporate history.

It may take approximately 12 to 15 months for the merger to be completed. Nuvama recently mentioned two examples of BFSI mergers where it took 12-15 months to complete the formalities. The first was HDFC Twins, which will be completed in 15 months. The second was the merger of Shriram Transport Finance Company and Shriram City Union Finance, which was completed in 12 months.

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