IDFC First Bank slips 3% after over 2% equity change hands in block deals

Shares of IDFC First Bank slipped 3 per cent to Rs 75.10 on the BSE in Thursday's intra-day trade after over 2 per cent equity of the private sector lender changed hands via block deals.

At 09:15 am; as many as 165 million equity shares representing 2.33 per cent of the total equity of IDFC First Bank changed hands via block deals on the BSE, the exchange data shows. However, the names of the buyers and sellers were not ascertained immediately.

As on December 31, 2023, Cloverdell Investment held 15.89 million equity shares or 2.25 per cent stake in IDFC First Bank, the shareholding pattern data shows.

According to media reports, Cloverdell Investment was likely to sell 159 million shares in IDFC First Bank through the block deal route on Thursday. Cloverdell Investment is an affiliate of US-based private equity firm Warburg Pincus.

Meanwhile, thus far in the calendar year 2024, IDFC First Bank has underperformed the market by falling 14 per cent, as compared to 1.5 per cent rise in the S&P BSE Sensex. However, in the past one year, the stock has appreciated by 43 per cent, as against the 27 per cent rally in the benchmark index.

IDFC First Bank is accelerating its growth with a focus on retail advances. Advances of the bank grew by 26.1 per cent year-on-year (YoY) to Rs 1.85 trillion during the December 2023 quarter, while customer deposits grew at an exceptional pace of 37.2 per cent YoY.

The bank aims to maintain strong deposit growth as it has to fund the increasing loan demand along with the repayment of legacy borrowings. The CASA ratio of the bank increased to 46.8 per cent, compared to 46.4 per cent in the previous quarter. The capital adequacy of the bank stands at 16.7 per cent.

The bank is poised to sustain its growth trajectory with robust credit expansion, a consistent margin, enhanced asset quality and an expansion of branch network. Anticipating a 30 per cent CAGR in PAT in FY25–26, the brokerage firm Geojit Financial Services estimates a ROE of 13 per cent for FY26.

IDFC First Bank delivered a mixed quarter, with a miss in earnings (due to higher provisions) and improvements in margins sequentially. Deposit traction remained robust, while CASA mix improved sequentially, defying the systemic trend. RoA stood at 1.16 per cent as high opex remained a drag, said the brokerage firm Motilal Oswal Financial Services (MOFSL).

The brokerage firm believes that the C/I ratio may remain elevated in the near term, mainly due to the need for deposit mobilization at a healthy run rate and continued investments in business, technology, and branches. MOFSL estimates margins to remain stable, benefiting from steady loan growth, limited deposit re-pricing, and further replacement of high-cost borrowings in FY25.