SVKM’s Narsee Monjee College of Commerce and Economics

(Autonomous)
COMMERCE DEPARTMENT

Subject: BUSINESS FINANCE

B.Com. SEM IV / 2024-25

Teacher In-charge Ms.

Tessy Philji

“Comparative Study of the Capital Structure and Stock Prices Pre and Post Mergers
and Acquisitions of IDFC Limited”

Student Name SAP ID Division & Company Phone

Roll No. Number
Soumya Jain 45611230448 B048 IDFC Limited 9521259582
 IDFC Limited

Introduction

IDFC Limited is a leading Indian financial services company that provides a broad range of services,
including infrastructure financing, asset management, and advisory services. It was originally founded
as a development finance institution in 1997 under the name Infrastructure Development Finance
Company (IDFC), with a primary focus on financing infrastructure projects in India.

Over the years, IDFC expanded its operations and restructured its business to cater to various sectors
within the financial services industry. It later changed its name to IDFC Limited to better reflect its
diversified interests.

The company has a presence in various segments:

 IDFC Bank (now merged with IDFC First Bank) focuses on retail and corporate banking services.

 IDFC Asset Management Company offers a variety of mutual fund products.

 IDFC Private Equity provides funding for growth-stage companies.

 IDFC Securities offers investment banking services.

IDFC is also known for its role in financing infrastructure projects like roads, power plants, and urban
infrastructure, and it remains a significant player in the financial landscape of India.
 Company Size

As of 2025, IDFC Limited is a large and diversified financial services company, with a significant
presence in India’s financial sector. The company's size can be measured in several aspects:

1. Market Capitalization: IDFC Limited has a notable market capitalization, though specific figures
may fluctuate due to market conditions. As of recent reports, its market capitalization is in the
range of several billion dollars, reflecting its role as a major financial entity.

2. Workforce: IDFC has a substantial workforce, employing thousands of professionals across its
various business units, including banking, asset management, infrastructure financing, and
investment advisory services.

3. Assets and Financials: IDFC has substantial assets under management, particularly through its
asset management division, IDFC Asset Management Company. The company's total assets, as
well as annual revenues, reflect its strong in infrastructure financing, retail banking, and mutual
funds. foothold

4. Geographic Presence: While the company is primarily focused on India, IDFC has expanded its
services to international markets through partnerships and investments.

Overall, IDFC Limited ranks as one of the prominent players in India’s financial landscape, with
substantial assets, a diversified service portfolio, and a broad employee base. Specific details of the
company’s size can be found in its annual reports or official filings, which provide up-to-date figures on
market capitalization, revenue, and assets.

Services offered and operations performed by IDFC FIRST Bank

IDFC Limited offers a wide range of financial services through its various divisions and subsidiaries.
The company is primarily involved in infrastructure financing, banking, asset management, investment
advisory, and private equity. Here’s a breakdown of its key services and operations:
1. Infrastructure Financing

 IDFC’s core strength lies in providing financing for infrastructure projects in India, including
sectors like roads, power, telecom, and urban infrastructure.

 It supports both private and public infrastructure initiatives, facilitating long-term capital for
large- scale projects.

2. Banking Services (IDFC First Bank)

 After the merger with Capital First, IDFC First Bank offers a wide range of retail and corporate
banking services:

o Personal banking: Savings accounts, fixed deposits, personal loans, and home loans.

o Corporate banking: Working capital finance, trade finance, and business loans.

o Digital banking services for easy access and transaction management.

3. Asset Management (IDFC AMC)

 IDFC’s asset management arm offers a variety of mutual fund products catering to different
investment needs:

o Equity funds, debt funds, hybrid funds, and sector-specific funds.

o Services include investment advisory, wealth management, and portfolio management for
retail and institutional clients.

4. Private Equity

 IDFC Private Equity focuses on investing in growth-stage companies in sectors like

infrastructure, healthcare, and technology.

 The division provides equity funding and strategic support to help businesses scale and succeed
in the market.

5. Investment Banking (IDFC Securities)

 IDFC Securities offers investment banking services, including advisory on mergers and
acquisitions, capital raising, and corporate restructuring.
  It also provides equity research, broking services, and market analysis for institutional and retail
clients.

6. Advisory and Consulting

 IDFC offers advisory services, especially in the area of infrastructure project financing,
helping both private companies and government entities with project structuring and execution.

 It provides strategic consulting for investments in various sectors, with a focus on long-term
growth.

7. Sustainable Finance and Social Impact Investments

 IDFC has shown a commitment to sustainable finance, investing in projects that have a positive
social or environmental impact.

 It funds initiatives that align with the government’s policies on renewable energy, sustainable
urban development, and social infrastructure.

These services are designed to meet the financial needs of a wide range of clients, from individual
retail customers to large corporate clients, government bodies, and infrastructure developers.
Through these diversified operations, IDFC aims to contribute significantly to India’s financial
and infrastructure development.

Capital Structure of IDFC FIRST Bank

The capital structure of IDFC Limited refers to the mix of debt and equity that the company uses to
finance its operations, projects, and investments. While the exact capital structure can fluctuate due to
market conditions, corporate actions, and financial performance, it typically consists of the following
components:

1. Equity Capital

 Shareholder’s Equity: This represents the ownership interest in the company, which includes
common shares issued to the public or institutional investors. The equity capital reflects the
ownership and is a key indicator of the financial stability and solvency of the company.

 Retained Earnings: Profits that the company retains rather than paying out as dividends. Retained
earnings are used for reinvestment into the business or to reduce debt.
2. Debt Capital

 Long-term Debt: IDFC has historically relied on long-term debt to fund infrastructure projects
and other financing needs. This includes bonds, debentures, or loans that have a maturity period
of more than one year.

 Short-term Debt: The company may also utilize short-term borrowings such as working capital
loans, bank overdrafts, and commercial paper for its operational funding needs.

3. Hybrid Instruments

 The company may use convertible securities or other hybrid instruments, which can convert into
equity or be redeemed in the future, to raise capital or fund specific projects. These instruments
provide flexibility to the company in managing its capital structure.

4. Other Sources

 Equity Issuance: If needed, IDFC can issue additional shares to raise capital from the market.

 Subordinated Debt: In some cases, the company might issue subordinated debt, which ranks
lower in case of liquidation but offers a higher return.

5. Capital Adequacy

 As a financial institution, IDFC also needs to maintain certain capital adequacy ratios, which are
the minimum required capital reserves as per regulatory guidelines, particularly under the norms
set by the Reserve Bank of India (RBI) for IDFC’s banking operations (post the merger of IDFC
Bank with Capital First).

General Observation on IDFC's Capital Structure:

 Historically, IDFC has had a healthy mix of equity and debt, with debt being a primary tool for
financing infrastructure projects.

 Following the merger with Capital First, IDFC has strengthened its balance sheet and improved
its capital position, while also enhancing its retail banking and asset management segments.
 Merger of IDFC LIMITED

Pre-Merger (IDFC Bank) Overview

Before the merger, IDFC Bank was established in 2015 as a wholly-owned subsidiary of IDFC
Limited, primarily focused on providing a wide range of banking services to retail, corporate,
and government customers. The bank aimed to provide services like savings and current
accounts, personal loans, home loans, and corporate banking services. IDFC Bank's primary goal
was to tap into the growing demand for banking services in India.

Key aspects of IDFC Bank pre-merger:

 Focus: Initially, IDFC Bank’s key strengths were in infrastructure financing, given its origins in
IDFC Limited, but it eventually expanded to retail banking, offering digital services and loans.

 Capital: IDFC Bank was focused on raising capital, expanding its balance sheet, and building a
strong retail banking presence.

 Services: Digital-first banking, corporate banking, and infrastructure financing services were
among the key offerings.

 Market Position: Although a relatively new entrant in the banking sector, IDFC Bank was seen
as having strong infrastructure financing expertise, setting it apart from other banks.

The Merger: IDFC Bank + Capital First

In 2018, IDFC Bank merged with Capital First, a leading financial services company that focused on
providing retail loans, including personal loans, auto loans, and home loans. The merger was
announced to help create a stronger entity that combined IDFC Bank’s banking infrastructure
with Capital First’s strong retail lending business, which would enable the combined entity to
serve a wider customer base with a broader suite of products.

Key aspects of the merger:

 Announcement Date: The merger was announced in 2018 and was completed in December 2018.
  Purpose: The aim was to create a diversified financial services entity that could cater to the needs
of both retail and corporate customers.

 Share Swap Ratio: The merger was structured as a share swap, where shareholders of Capital
First received shares in IDFC Bank as part of the deal.

 New Entity: Post-merger, the combined entity was rebranded as IDFC First Bank, combining the
strengths of IDFC Bank’s infrastructure expertise and Capital First’s retail lending portfolio.

Post-Merger (IDFC First Bank)

After the merger, the new entity IDFC First Bank emerged as a more robust, diversified bank with a
wider customer base and a stronger product offering. The merger enabled IDFC First Bank to
offer a broader range of services across retail banking, corporate banking, and infrastructure
financing.

Key aspects of IDFC First Bank post-merger:

1. Stronger Retail Focus:

o With the retail loan portfolio from Capital First, IDFC First Bank became better
positioned to target the retail banking segment, including home loans, personal loans, and
auto loans.

o The bank also enhanced its focus on digital banking services to provide customers with
an easy, tech-savvy banking experience.

2. Increased Customer Base:

o The merger expanded the customer base significantly by combining IDFC Bank's
corporate clients with Capital First's extensive retail customer base, enabling IDFC First
Bank to cross-sell a wider range of financial products.

3. Improved Financial Strength:

o The merged entity benefited from greater financial strength, enhanced capital reserves,
and an expanded balance sheet, making it a competitive player in the banking industry.

o IDFC First Bank’s loan book became more diversified, offering a mix of retail and
corporate loans.

4. Brand Repositioning:
 o The bank adopted a new brand identity – IDFC First Bank, signaling a shift toward a
more customer-focused, retail-oriented banking approach, while retaining its expertise in
infrastructure financing.

Stock prices of IDFC Limited

IDFC Ltd.'s stock price before and after its merger with IDFC First Bank can be seen in the following
information.

Before the merger

 On October 9, 2024, UBS Group purchased 81 lakh shares of IDFC Ltd. at a price of Rs 107.92
each
 The 52-week high for IDFC Ltd. was Rs 128.70 on April 26, 2024
 The 52-week low for IDFC Ltd. was Rs 104.50 on August 5, 2024

After the merger

 IDFC Ltd. shareholders received 155 shares of IDFC First Bank for every 100 shares of IDFC
Ltd.
 The average price per share of IDFC First Bank would be Rs 64.52 if 100 shares of IDFC Ltd.
were purchased at Rs 100 per share
 Fractional shares were settled in cash and credited to the shareholder's primary bank account
 Conclusion on IDFC Limited

IDFC Limited has evolved significantly from its inception as a development finance company in
1997 to a diversified financial services conglomerate. The company’s transformation reflects its
ability to adapt to changing market dynamics and expand into various sectors within the financial
industry.

Through its banking operations (IDFC First Bank), asset management (IDFC AMC), private equity
and investment banking services, and expertise in infrastructure financing, IDFC has built a
comprehensive portfolio that caters to a wide range of clients, including individuals,
corporations, and government entities. The strategic merger of IDFC Bank and Capital First in
2018 further strengthened its position in retail banking and enhanced its financial strength.

IDFC’s focus on sustainable finance, digital banking, and infrastructure development has allowed it
to remain a key player in India's financial sector. As a result, the company is well-positioned for
long-term growth, offering innovative financial solutions while contributing to India’s
development in sectors like infrastructure, energy, and urban development.

The company’s strong capital structure, coupled with a robust management team, ensures that it is
prepared to meet the challenges of the rapidly changing financial landscape, making IDFC
Limited a significant entity in India's financial services market.

In conclusion, IDFC Limited stands as a well-diversified and resilient financial services company
with a comprehensive strategy aimed at delivering value to shareholders, customers, and the
broader economy.
 BIBLIOGRAPHY

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