Maybe a 5-15% discount is possible to the calculated swap ratio
No, in fact, company may use that to get additional shares in IDFC FB instead of giving it out as dividend as that would be more tax beneficial to IDFC’s shareholders.
I don’t think so, and as @diffsoft has mentioned IDFC FB may not even want to issue any fresh shares at a 50% discount to the previous round
Basically, my pt. regarding AMC cash distribution was this only - With cash in hand frm AMC sale, can the holding co. negotiate a better merger for the Bank shares. I mean, as of now - against the ratio of 1.43, normally one expects the ratio arnd 1.2 or so. But with, 4k odd cash in hand,can this be put to more towards 1.55 - 1.6.
Below are the number of shares of both post latest ESOPs :-
IDFC
No. of shares : - 1,59,64,95,942
Probable swap ratio :- 1.2 — > IDFC Bank shares - 1,91,57,95,130
IDFC Bank
No.of shares : - 6,21,90,86,432
Personally, I was disappointed wid mgmt lethargy earlier in winding up the holdco and had exited the position. The time to pursue AMC sale was whn cos. were selling at 10x AUM not the 3x that they got.This time want to understand and get that extra MOS for the mgmt factor.
Again, you are wrong, earlier they were getting not more than 2.5k cr as the performance and PAT level of the business was much lower. In the last 2-2.5 years, they were able to get 2x of what they were being offered as they rapidly increased the PAT of AMC business. Given that they are not a Top 5 player and they are primarily present in debt schemes - I think they have got a very good deal for the IDFC shareholders.
AMC profits down 41% QoQ and 52% YoY. Trading at an annunalized 50x PE at the deal value with Bandhan of 4,500cr. For reference HDFC AMC is trading at 30x PE.
I don’t think it matters for IDFC shareholders anymore. Business is sold, selling price is already fixed. The only two things to track are IDFC bank’s performance and demerger.
Sunil Kakar is out from IDFC. He was under fire from investors for not doing enough towards reverse merger and also for his huge compensation. The existing compliance officer has been appointed as MD.
Disc: Shifted investment from IDFC bank to IDFC months ago
IDFC corporate structure as per Latest Annual Report. As per AR 21-22
Application for merger of IDFC Alternatives, IDFC Projects and IDFC Trustee Company was filed in December 2021 and final order from NCLT is awaited.
Steps to diverse stake in IDFC Foundation JV’s - Delhi Integrated MultiModal Transit System (DIMTS) and Infrastructure Development Corporation (Karnataka) Limited (IDeCK) with the state governments of Delhi and Karnataka respectively were undertaken.
AMC sale is mentioned as subject to various regulatory approvals
The Company had made provision of Rs.35.62 crore on Novopay Solutions Private Limited (“Novopay”) (associate of the Company). Performance of Novopay had lead to substantial erosion of its net worth. Accordingly, investment was completely impaired.
With this step, I think, IDFC has ticked all the boxes necessary to seek approval of RBI for the reverse merger with IDFC First Bank. AMC sale just needs the approval of SEBI which may also come through quickly.
Disc: Shifted entire investment in IDFC first bank to IDFC and app. 10% holding
It looks like the investment at 45 Rs per share at IDFC being the low level (now 42 Rs is the 52 wk low) has worked out very well with IDFC touching new highs and now firmly at 80+, it also looks like IDFC can likely consume its 4000 cr by engaging that amount as a primary investment into IDFC First Bank. All in all has turned out to be a great investment. It actually was available at 13 Rs per share (half of what it sold its MF business for in 2022) during Covid lows and now has gone up 6x !!
Further to our understanding gained from talking to some higher authorities as part of our primary research into the stock.
As per RBI rules, IDFC can’t exceed 40% shareholding in the bank. Given that IDFC holds around 36.5% stake already in the bank, the bank can max put in capital equivalent to a 3.5% odd stake in the bank. At current prices, this may be around 1300-1500 cr. Given that IDFC would have 4k cr post everything from the AMC sale, the balance amount would have to be adjusted in the swap price at the time of the merger and given along with the final merger maybe a year down the line or given partly as a dividend now and partly at the time of the merger. Most likely we think it will be the latter to satisfy the needs of some large shareholders who may want some dividends as well.
Mumbai-based IDFC Ltd on Friday, December 9, said the Chennai bench of the National Company Law Tribunal (NCLT) has approved the merger of IDFC Alternatives, IDFC Trustee, and IDFC Projects with a private lender. “The Scheme of Amalgamation of IDFC Alternatives, IDFC Trustee Company and IDFC Projects (wholly owned subsidiary Companies) into IDFC was approved and sanctioned by the National Company Law Tribunal, Chennai bench vide Order dated November 22, 2022,” the lender said in an exchange filing.