Buy IDFC FIRST Bank; target of Rs 75: ICICI Securities

ICICI Securities research report on IDFC FIRST Bank

We upgrade IDFC First Bank (IDFCFB) to BUY with a revised TP of INR 75, as the large proposed capital infusion (INR 75bn) improves visibility on superior loan growth/operating leverage (without any material dilution in book value) topped with inexpensive valuations. The announced preferential infusion to Warburg and ADIA should boost the bank’s CET1 by ~280bps, catapulting its pro forma CET1 to ~16.5%. With a meaty share of fixed rate loans, at 60–65% of overall, ~32% share of wholesale TD/borrowings and an additional ~30% share of high-rate savings in overall funding, IDFCFB seems well placed on NIM and could surprise positively. MFI slippages have been elevated and could rise further in the near term, but the share itself is receding (now down to 4.8% vs. 7.2% YoY). Ex-MFI, gross slippages have been stable (though elevated) and are a key monitorable; but improved disclosures and contained SMA figures along with an improving overall asset quality environment provide reasonable comfort.

Outlook

We have not incorporated the capital infusion yet, as this is subject to regulatory approvals, but highlight no material change in ABV for FY26E/FY27E. We raise our target multiple to ~1.2x FY27E ABV (vs. ~1.1x) due to the potentially enhanced capital buffer and likely RoA revival (off low base) and arrive at a revised TP of INR 75 (INR 68 earlier). Upgrade to BUY.