 "HC okays IDFC-IDFC Bank de-merger")
The high court here has given a nod for IDFC's scheme of arrangement (de-merger) of its banking entity, IDFC Bank Ltd.
The order, by judge Pushpa Sathyanarayana, comes after IDFC Ltd filed an affidavit that all statutory provisions had been complied with for the proposed scheme. It said the net worth of the financing undertaking to be demerged into IDFC Bank Ltd, the resulting company, would be Rs 6,500 crore on the effective date. Further, after the investment by IDFC Financial Holding Company Ltd, the total net worth of IDFC Bank Ltd would be Rs 13,825 crore, more than sufficient to meet any liability from repayment of long-term infrastructure bonds (LTIBs.)
“The scheme does not in any manner affect the terms of the LTIBs with respect to the maturity date, buy-back date, interest rate or the redemption/ maturity amount payable,” it was said.
IDFC Ltd has undertaken that if the Bank is unable to honour the liability to any bondholder or holders of LTIBs, it will do so.
According to the order, it is stated that the de-merged company, IDFC, primarily engaged in project financing and other financial services, has pursuant to in-principle approval from the Reserve Bank of India, proposed to de-merge its financing undertaking to IDFC Bank, a public limited company, to carry out the business of banking.
In October 2014, the board of directors of the companies considered and approved the said scheme of arrangement.
Former Union finance minister P Chidambaram appeared for IDFC. He stated that in the scheme of arrangement, the bonds are also transferable and the LTIBs, being part of the financial undertaking being transferred to the resulting company, viz IDFC Bank, it has become statutory to convert the secured bonds to unsecured ones. The de-merged company, he said, had been regularly paying interest to the bond holders and undertakes to continue doing so.
The order, by judge Pushpa Sathyanarayana, comes after IDFC Ltd filed an affidavit that all statutory provisions had been complied with for the proposed scheme. It said the net worth of the financing undertaking to be demerged into IDFC Bank Ltd, the resulting company, would be Rs 6,500 crore on the effective date. Further, after the investment by IDFC Financial Holding Company Ltd, the total net worth of IDFC Bank Ltd would be Rs 13,825 crore, more than sufficient to meet any liability from repayment of long-term infrastructure bonds (LTIBs.)
“The scheme does not in any manner affect the terms of the LTIBs with respect to the maturity date, buy-back date, interest rate or the redemption/ maturity amount payable,” it was said.
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The net worth of the residual undertaking with IDFC Ltd, the petitioner/transferor, even on a standalone basis, would be Rs 10,154 crore.
IDFC Ltd has undertaken that if the Bank is unable to honour the liability to any bondholder or holders of LTIBs, it will do so.
According to the order, it is stated that the de-merged company, IDFC, primarily engaged in project financing and other financial services, has pursuant to in-principle approval from the Reserve Bank of India, proposed to de-merge its financing undertaking to IDFC Bank, a public limited company, to carry out the business of banking.
In October 2014, the board of directors of the companies considered and approved the said scheme of arrangement.
Former Union finance minister P Chidambaram appeared for IDFC. He stated that in the scheme of arrangement, the bonds are also transferable and the LTIBs, being part of the financial undertaking being transferred to the resulting company, viz IDFC Bank, it has become statutory to convert the secured bonds to unsecured ones. The de-merged company, he said, had been regularly paying interest to the bond holders and undertakes to continue doing so.