Warburg-Backed Indian Bank Hits 3-Year High on Share Sale Plans
IDFC First Bank Nerul Branch (Photo: BloombergQuint) 

Warburg-Backed Indian Bank Hits 3-Year High on Share Sale Plans

Shares in IDFC First Bank Ltd. rose to their highest in more than three years after the Warburg Pincus-backed private lender said it plans to raise as much as 30 billion rupees ($413 million) by selling shares.

The company’s board approved the plan to help spur growth at the bank as the nation’s economy recovers from the pandemic-induced slump, it said in a statement on Thursday. IDFC First may raise funds via a private placement, sell shares to qualified institutional investors or the public, according to the filing.

The stock rose as much as 15% to 66.8 rupees, its highest level since Jan. 2018, and was the best performer among its peers in the NSE Nifty Bank Index. India’s benchmark index declined.

“With this capital raise we will be in a very strong position to take advantage of the economic growth which is coming back roaring,” IDFC First Bank Chief Executive Officer V Vaidyanathan said in an interview. It will also allow the bank to grow its retail lending book by 25% “for many years to come,” he said.

Fund Raising

IDFC First Bank had raised 20 billion rupees through an institutional placement in June joining its larger rivals in tapping the markets. Lenders have been using the funds to bolster their bad loan buffers during the pandemic and prepare for faster growth once demand picks up.

IDFC First Bank was created when IDFC Bank merged with shadow lender Capital First in 2018. Since then, it has been expanding its retail lending and shrinking its wholesale loans to diversify its assets.

The lender’s core Tier 1 equity will rise to over 15.5% after the fund-raising, Vaidyanathan said. It was 13.82% at the end of December, much higher than the regulatory minimum of 7.375%.

The company reported a gross bad loan ratio of 1.33% at the end of December. That ratio would have been 4.18% if India’s Supreme Court hadn’t barred banks from classifying any loans as non-performing assets from September.

The ratio is expected to ease as loan collections have been more than 98% and improving every month, Vaidyanathan said.

“We believe the way economy is coming back and repayments are starting, in about three quarters things should normalize,” he said.

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