Buy IDFC; target of Rs 77:Prabhudas Lilladher

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Prabhudas Lilladher's reserach report on IDFCIDFC’s earnings continue to be tepid as balance sheet contraction persists while spreads remain under pressure (20bp QoQ decline). Asset quality deteriorated sharply with GNPLs increasing by 81% QoQ however hefty one‐time provisioning of Rs25bn resulted in a decline in net stressed assets. Other income stood stable on YoY basis led by pick‐up in fixed income fees and further 2% stake sale in NSE leaving behind a residual 2% stake now. IDFC has now increased its provisioning to Rs46bn (~10% of total loans) and has identified Rs88bn of assets which can potentially turn stressful. IDFC has spent heavily in its transition to a bank and orderly execution will be critical for stock performance as challenges still remain especially fallout from legacy book and building retail franchise. We maintain BUY with PT of Rs77 for IDFC and value IDFC Bank at Rs68per share.Asset quality deteriorated sharply with GNPLs increasing by 81% QoQ however hefty one‐time provisioning of Rs25bn resulted in a decline in net stressed assets. IDFC now has provisions amounting to ~10% of total loans on its balance sheet. We maintain BUY with revise PT of Rs77 for IDFC and maintain BUY rating. We further value IDFC Bank at Rs68per share.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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