IDFC First Bank shares tank 3% amid block deal report; Warburg Pincus arm likely seller

IDFC First Bank saw its share falling over 3 per cent in Thursday's session amid reports of a proposed stake sale by existing shareholder. An arm of private equity player Warburg Pincus, Cloverdell Investment, was reportedly looking to sell its entire 2.3 per cent stake in the bank through block deals today. A report by CNBC TV18 suggested the Warburg Pincus arm could sell 15.9 crore IDFC First Bank shares worth Rs 1,191.40 crore at a floor price of Rs 75 apiece, which was at a 4 per cent discount to IDFC First Bank's Wednesday closing price.

Following the development, the stock fell 3.48 per cent to hit a high of Rs 75.10 on BSE. Data showed a total of 17.80 crore IDFC First Bank shares worth 1,340 crore changed on BSE, which was 88 times its average two-week average volumes. On NSE, Rs 579.59 crore worth bank shares changed hands. The banking stock is down 14 per cent in 2024 so far but is up 43 per cent for the one-year period.

As per CNBC TV18, a total of 8.3 crore shares or 2.6 per cent equity worth Rs 1,386 crore changed hands in large deal.

Cloverdell Investment owned about 9.85-9.87 per cent stake in IDFC First Bank in 2018-2019, as per data compiled from corporate database AceEquity. 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.

BOB Capital Markets in a note this month said the IDFC First Bank's 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 said.

That said, while the strategic realignment of balance sheet may improve IDFC First Bank's overall performance but the bank still lags in operational efficiencies, the broking firm said.

"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.