Thank you. That’s what I did today, I sold off IDFC Ltd (I’ll pay 10% LTCG) and bought an equivalent amount of IDFC First. Brokerage and all other transaction costs (both sides) will add up to an additional loss of 0.5%.
I bought IDFC First becase I believe both stocks will move together now, because the money that IDFC Ltd had (from sale of AMC) is now either distributed as dividend (Rs 1760 Cr) or invested in equity capital of IDFC First (Rs 2196 Cr) – so after this, IDFC Ltd will just be a holding company (with ~40% share of IDFC First) with no other businesses left. They may have a little bit of money left in the bank to pay salary and other obligations till the merger is complete.
The only other play left is arbitrage (based on today’s closing price, IDFC shareholders should get only 137 shares of IDFC First for every 100 shares) but ideally, they should get more based on their 40% ownership of IDFC First. However we don’t know what the boards/ managements of both institutions will decide. That can be a separate positional trade. One can hold IDFC Ltd shares in their demat in the hope that they will get at least 135-140 shares of IDFC First when the ratio is declared, and if they get more, it is a bonus.
I’d like to hear on this – what do others think about it?
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