IDFC First Bank Plans To Raise 2,000 Cr In FY24

India's IDFC First Bank is looking to raise Rs 2,000 crore in equity capital in the second half of the current financial year, a source familiar with the matter said.

The fundraiser follows a reverse merger between parent IDFC and IDFC First Bank announced earlier this month.

IDFC First Bank has board approval to raise Rs 4,000 crore. It has already raised close to half that amount through a preferential allotment to IDFC.

The remaining amount of about Rs 2,000 crore will be raised in the second half, the source, who declined to be identified as discussions are private, said. IDFC First Bank declined to comment.

Shares of the lender have gained 33 per cent so far this year compared to the Nifty banking index, which is up 6.4 per cent.

Over the past three years, IDFC First Bank has brought down its bad loans and accelerated deposit accretion to strengthen its fundamentals, allowing it to raise institutional capital with ease, said the source.

"This will help fund the bank's growth."

Its deposit base has risen 47 per cent over a year ago to Rs 1.4 lakh crore as of March 2023, while its loan book of Rs 1.6 lakh crore, which was weighed down by infrastructure loans, is now heavily weighted in favour of more healthy retail loans.

Gross bad loans have fallen to 1.65 per cent from 4 per cent in March 2021.

IDFC First Bank can grow 25 per cent on a compounded annual basis and gain market share, said brokerage house Emkay in the report dated 7 July.

The brokerage house said that it is expected to deliver a return on assets (ROA) of 1.3-1.5 per cent and a return on equity of 12-15 per cent over the next three years despite factoring in capital raise following the reverse merger, shareholders of IDFC will be direct shareholders in IDFC First Bank, including the Government of India, which will hold close to 11 per cent in the bank.

The government is not likely to seek a seat on the bank's board, the person said.

(REUTERS)