MUMBAI: A story similar to that of ICICI merging with ICICI BankBSE -0.35 % to create a behemoth may play out again after a gap of 15 years. This time around it may well be IDFC and IDFC Bank merging after the Reserve Bank of India’s ‘on-tap’ licensing rules pave the way for dumping the holding company structure.
The plans are sketchy at this point with less than 24 hours after RBI said that entities like IDFC if in future wanted to be a bank need not follow the complex holding company structure. But the top executives of the company are at the drawing board to make the best for shareholders.
“It may not exactly be a reverse merger there are variants to that … the details of which I cannot really discuss,” Rajiv Lall, chief executive, IDFC Bank, told ET. “But the message is that there is enough in the new regulations of the RBI that allows us to engage in a productive discussion with the regulator to find a solution to our holding company discount problem.”
RBI this week announced a policy that opens doors for aspirants to seek a banking license whenever they feel they qualify and they find it desirable unlike in the past when it called for applications once in a decade or not for decades at all. This opens up opportunities for firms such as IIFL Holdings, Shriram group controlled by billionaire Ajay Piramal, Dewan Housing Finance group and EdelweissBSE -2.65 % run by Rashesh Shah. IDFC which started as an infrastructure lender got a license in 2014 to become a bank.
But the process was so complicated that it was almost crippling for shareholders and even for the management to exploit its strengths. IDFC formed a wholly-owned subsidiary IDFC Financial Holding Company, which owns 52% of IDFC Bank. There is another listed entity IDFC which runs other financial services business.
“We have to seek clarity from the RBI and we may have to reorganize ourselves in such a way that we become eligible for this new scheme,” said Lall. “We have had informal talks with RBI but we haven’t written a formal letter saying this is what we want.”
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Source: Economic Times
