IDFC First Bank share price tanked 4.8% to Rs 77.99 today after the bank’s board approved the amalgamation of IDFC with the bank. The share exchange ratio for the amalgamation will be 155 equity shares of IDFC First Bank for every 100 equity shares of IDFC. IDFC share price rose 0.55% to Rs 109.7. IDFC First Bank stock has gained over 6% in the last one month and 128% in the last one year.
“In line with street’s expectations, the share swap ratio is in favour of target company (IDFC Ltd). The swap ratio equates to 1.55 and street / Nuvama Alternative was building in 1.40 (worst case scenario) and 1.60 (best case scenario). We expect the spread to contract at today’s opening itself thus we will recommend any spread trade only when spread is at adequate levels as per the merger closure timeline. Hypothetically if spread is available at 13-14% then it’s a good level to enter but that looks unlikely to happen,” said Abhilash Pagaria, Head – Nuvama Alternative & Quantitative Research.
“IDFC First Bank continues to be Nuvama Alternative Research’s top probable contender for MSCI August 2023 Standard Index inclusion and at Rs 81.7/share – the stock needs more 4% kind of jump (around Rs 85/share) till third week of July to make the cut for inclusion . The potential inflow could be of USD 170 to 180mn. The merger aspect wont impact its chances of inclusion in MSCI. The only deterrent possibly could be stock not meeting the price cut off level requirement. The merger completion should take anywhere around 12 to 15 months from now,” said Abhilash Pagaria.