IDFC First Bank block deal: Stock in focus as Warburg Pincus arm may sell 2.3% stake

IDFC First Bank block deal: Shares of IDFC First Bank Ltd are in focus on Thursday as private equity firm Warburg Pincus is reportedly looking to sell its entire 2.3 per cent stake in the bank through block deals on Thursday, as per media reports. Business Today could not independently verify the reports.

As per reports, Warburg Pincus' arm Cloverdell Investment may sell 15.9 crore IDFC First Bank shares worth Rs 1,191.40 crore. The floor price, as per CNBC TV18 is set at Rs 75 a piece, which suggests a 4 per cent discount to IDFC First Bank's Wednesday closing price.

Data compiled from corporate database AceEquity showed Cloverdell Investment owned about 9.85-9.87 per cent stake in IDFC First Bank in 2018-2019. In the March quarter of 2023, it held 7.12 per cent stake in IDFC First Bank and by the December quarter that stake had fallen to 2.25 per cent or 15,88,53,018 shares.

Warburg Pincus had last year divested a partial stake in IDFC Bank via a block deal. The US private equity firm, through its affiliate company Dayside Investment, sold 1.3 per cent stake or 9.17 crore shares in the private lender. Dayside Investment once held 1.62 per cent stake in the IDFC First Bank.

The IDFC First Bank management is targeting credit and deposit CAGR of 20 per cent and 25 per cent, respectively, over FY24-FY29. Net interest margin (NIM) for the lender is seen stabilising at current mark with upward bias (6.4 per cent in Q3FY24).

BOB Capital Markets in a note this month said the strategic growth in the loan book will be driven by the SME and retail portfolios, likely aiding NIM. Along with strong deposit growth, IDFC First Bank has a healthy CASA ratio of 47 per cent in Q3FY24, the highest among peers, which also supports NIM.

BOB Capital Markets, however, said the strategic realignment of balance sheet may improve IDFC First Bank's overall performance but the bank still lags in operational efficiencies.

"Better operational efficiencies would be key to improving ROA/ROE (1.4 per cent/14 per cent in FY26E). Considering sustainable growth and stable asset quality, we assume coverage with BUY, valuing the stock at 1.6x FY26E ABV using the Gordon Growth Model," it said.