IDFC First Bank - Superior Incremental Unit Economics Demonstrates Business Potential: ICICI Securities
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ICICI Securities Report
IDFC First Bank Ltd.’s evolution is unique in a sense- on getting license, it was created out of demerger of infrastructure financing business followed by merger of erstwhile Capital First Ltd.
Stress build-up and franchise investment resulted in a weak return profile (net worth erosion) during the transition phase.
However, the new bank, with a new board, new management and renewed focus, has made significant strides in retailisation and granularisation of its business.
Current return profile is dragged by high-cost structure, low fee income and elevated credit cost.
Nonetheless, its marginal unit economics is superior and incremental retail disbursements have potential return on equity of more than 20%.
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