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IDFC First Bank to Raise Rs 3,200 Crore through Preferential Issue


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IDFC First Bank’s board has given approval to raise approximately Rs 3,200 crore through a preferential issue. This move is aimed at taking advantage of upcoming growth opportunities. As part of this scheme, the bank will issue around 39.68 crore shares to some of the largest institutional investors in India, including LIC, HDFC Life, ABSL Insurance, Bajaj Allianz Life, ICICI Lombard, and SBI General Insurance. The shares will be allotted at a price of Rs 80.63 per share, which is a premium of 4.51% over the closing price of the bank’s shares on the last trading day before the board meeting.

Strengthening Capital Adequacy and Positioning for Future Growth

The fresh equity capital raised from these investors will further increase the bank’s overall capital adequacy to 17.49%. This calculation is based on the risk-weighted assets as of March 2024. Currently, the bank’s capital adequacy stands at 16.11% as of the same period. This capital raise will put the bank in a strong position to participate in future growth opportunities.

Strong Fundamentals and Growth Strategy

IDFC First Bank has built a strong deposit franchise with a growing branch network, modern digital systems, advanced analytics capabilities, a strong brand identity, customer-friendly products and processes, and high standards of corporate governance. The bank’s customer deposits have shown strong growth, with a 5-year CAGR of 37%, and this growth has further accelerated to 42% in FY24 compared to FY23. Additionally, the bank’s loan book, including credit substitutes, grew by 25% year-on-year in FY24.

The bank has also expanded its product offerings to include credit cards, gold loans, tractor loans, car financing, affordable housing, and more. It aims to continue growing these product lines. The bank’s portfolio is well-diversified across consumer, rural, MSME, and corporate customer segments.

Healthy Asset Quality

IDFC First Bank maintains a healthy asset quality, with gross non-performing assets (NPA) and net NPA at 1.88% and 0.60% respectively as of March 2024. In particular, the bank’s retail, rural, and SME finance books have low gross and net NPAs at 1.38% and 0.44% respectively. Excluding the infrastructure financing book, which is a legacy portfolio in run-down mode, the bank’s gross and net NPAs were only 1.55% and 0.42% respectively at the end of FY24.

The bank emphasizes its unique ability to grow the loan book sustainably while upholding high asset quality standards.

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