IDFC First Bank is the most likely candidate for MSCI August 2023 Standard Index inclusion, according to Nuvama Alternative Research. However, the stock must rise by at least 10% from present levels.
On July 4, the share price of IDFC First Firm fell more than 5% after the firm revealed the share exchange ratio for its merger with IDFC Ltd. IDFC Ltd shareholders would get 155 equity shares in IDFC First Bank for every 100 equity shares owned.
IDFC stockholders are earning a 17 percent premium as of the July 3 closing price. On Monday, the shares of IDFC Ltd had already risen by 7%. Based on Friday’s (June 30) closing price, this is a 24 percent premium.
IDFC Ltd rose 2% on July 4 due to an excellent risk-reward ratio for the parent, but IDFC First Bank lost 5%. IDFC First Bank shares were trading at Rs 79.25 on the NSE at 11:15 a.m., down 3.25 percent from the previous close.
IDFC Limited now owns 39.93 percent of IDFC FIRST Bank through its non-financial holding company. According to audited financials as of March 31, 2023, the bank’s book value per share would grow by 4.9 percent following the merger.
Can IDFC First Bank make it to MSCI?
IDFC First Bank is the most likely candidate for MSCI August 2023 Standard Index inclusion, according to Nuvama Alternative Research. However, the stock must rise about 10% from present levels to reach Rs 85 per share by the third week of July.
“Only then will it be considered for inclusion?” This (pricing) is based on the most recent worldwide cut-off levels, and please keep in mind that cut-off values change on a daily basis. “The potential inflow could be between $170 and $180 million,” said Abhilash Pagaria, Head of Nuvama Alternative & Quantitative Research.
The merger is set to be completed this year. He stated that as the merger proceeds, the ratio spread between the two companies is projected to narrow.
“We will only recommend any spread trade when the spread is at adequate levels as per the merger closure timeline,” Pagaria added.
Meanwhile, IDFC Ltd has Rs 600 crore in cash that would be transferred to IDFC First Bank following the merger, according to V. Vaidyanathan, the bank’s managing director, and CEO, to CNBC-TV18.
“By FY24, we plan to raise Rs 2,000 crore in capital.” “Capital adequacy will rise from its current level of 17.4 percent,” he said.