Edelweiss's reserach report on IDFCIDFC was established in 1997 as a private sector enterprise by a consortium of public and private investors to provide infrastructure financing. It was mainly started as a government initiative, but the structure of ownership changed in 2005‐06 with its IPO. In its current format it generates its income from core lending, as well has built a steady source of fee income business from its principal investments, asset management as well broking and investment. IDFC is one of the chosen ones to make the cut for banking license. We are subscribers to the evolution model laid out for IDFC’s metamorphosis from monoline NBFC to a universal bank.While the makeover into a bank may be tedious, given the RBI’s forbearance on infra lending, we expect the company’s intrinsic profitability to improve to clock RoE of 15% backed by 1.9% RoA by FY20. The bank will start with a clean state with most of the hit on the stressed portfolio already taken from net worth (as seen in Q1FY16). Moreover, top management’s ability to shape up the banking venture is undisputable given its successful track record. We maintain ‘BUY’. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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