Prabhudas Lilladher research has maintained market outperformer rating on IDFC and expects a target price of Rs 155.

Prabhudas Lilladher research report on IDFC

IDFC is emerging as one of the key beneficiaries of the infrastructure financing opportunity in the country with exposure to some of the high growth sectors such as energy, transportation, telecom and IT. Along with robust growth in lending business, the Asset management business currently manages a corpus of USD 650m and is expected to grow 4x over FY 07-09E to USD3.0billion post the deal with Citigroup, Blackstone and IIFC. IDFC has recently raised Rs 21billion through a QIP, reducing the leverage to a comfortable level of 2.95x. This leads to an increase in lending capability to a single borrower as well as leaves lot of room for expansion going ahead. We have valued the lending business at Rs112 per share, 3x FY 09E P/BV. The non-lending businesses contribute Rs 42.2 to the valuation. We re-iterate ‘Outperformer’ rating with a SOTP based target price of Rs 155.

Highlights

• Thrust on infrastructure development to grow the loan book by 37% CAGR over FY07-09E to Rs.261.5billion from Rs.139.1billion presently.
• High growth in AUM and consolidation of SSKI to increase the Non-Interest income by 2.6x over FY 07-09E. 
• Unlocking of private equity to provide significant cash flow.
• Investment in NSE, SSKI and other listed and unlisted companies valued at Rs.16.2 per share.