IDFC First Bank is looking to raise 20 billion rupees ($243.84 million) in equity capital in the second half of the current financial year, a source familiar with the matter said.
The fund raise follows a reverse merger between parent IDFC Ltd and IDFC First Bank announced earlier this month.
IDFC First Bank has board approval to raise 40 billion rupees. It has already raised close to half that amount through a preferential allotment to IDFC Ltd.
The remaining amount of about 20 billion rupees 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% so far this year compared to the Nifty banking index, which is up 6.4%.
Over the past three years, IDFC 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% over a year ago to 1.4 trillion rupees as of March 2023, while its loan book of 1.6 trillion, 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% from 4% in March 2021.
IDFC Bank can grow 25% on a compounded annual basis and gain market share, said brokerage house Emkay in report dated July 7.
Most Read 1Govinda started ‘rona-dhona’ about Salman Khan, Shah Rukh Khan, ‘ab ghar pe baitha hua hai’: Pahlaj Nihalani on torrid relationship with actor 2Asian Games 2023 Live Updates, Day 11: Satwik-Chirag in action, Lovlina Borgohain in action soon in final; archery gold for Jyothi-Ojas 3Show Rs 50,000-crore investment or apologise to Punjabis: Sukhbir Badal 4Jawan box office collection day 26: Shah Rukh Khan’s blockbuster refuses to slow down, nears Rs 1100 crore worldwide gross 5Here’s state-wise list of fake universities
It is expected to deliver a return on assets (RoA) of 1.3-1.5% and a return on equity of 12-15% over the next three years despite factoring in capital raise, the brokerage house said.
Following the reverse merger, shareholders of IDFC will be direct shareholders in IDFC Bank, including the Government of India, which will hold close to 11% in the bank.
Also ReadFCNR bonds were 'least bad' option to raise dollars: Raghuram RajanSEBI extends deadline for listed companies to confirm or deny market rumoursBanks start making provisions ahead of RBI’s ECL normsRBI, banks plan new features to boost CBDC transactions: Report
The government is not likely to seek a seat on the bank’s board, the person said.