IDFC: Goldman Sachs, Morgan Stanley cut target, earnings

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Foreign brokerages Morgan Stanley and Goldman Sachs have slashed target price and earnings per share estimates for IDFC, citing higher stressed loans, lower long term loan growth and lower long-term return on assets. The stock declined 3 percent intraday Tuesday, but recovered in late morning trade to rise nearly 2 percent.Goldman downgraded stock to sell. It believes IDFC will underperform peers due to slower-than-expected macro recovery (especially in infrastructure/industrial, which is a key segment for IDFC) and weak operating metrics for banking business in near-to-mid term. The brokerage slashed 12-month SOTP-based target price by 36 percent to Rs 115 from Rs 180 on lower earnings. Estimated lower earnings are driven by a slower-than-expected macro recovery and management disclosure regarding IDFC Bank’s networth (Rs 13,000-13,500 crore, 20 percent lower compared to Goldman Sachs' estimates) & broad banking strategy, it said.

Goldman believes spin-off of IDFC Bank from IDFC will reduce value for existing IDFC shareholders.

Weak relative positioning of IDFC Bank against existing corporate-oriented banks and near-term volatility will also cause underperformance of firm.

Additionally, due to the slower-than-expected macro revival and intense competition, operating parameters are unlikely to improve anytime soon, it feels. Goldman expects return on assets to remain below 1 percent in FY17E and gradually improve to 1.6 percent by FY24E on improving topline/operating leverage.

Morgan Stanley has also cut target price from Rs 200 to Rs 175 and earnings per share estimates for FY16, FY17e & FY18 by 18 percent, 11 percent & 9 percent respectively. "We cut target price to reflect lower EPS estimates and a one-time Rs 2,500 crore provisioning in Q2FY16, partially offset by rolling forward to September 2016. However, upside in stock is still 25 percent," it reasoned.

However, according to Morgan, valuation is attractive after recent correction.

Meanwhile, IDFC has fixed record date as October 5 for being eligible for IDFC Bank shares and IDFC shares will trade ex-demerger (i.e. ex-bank) with effect from October 1. IDFC Bank shares will be allotted (in the ratio of 1:1) to IDFC shareholders on October 9. IDFC Bank shares are likely to be listed on exchanges by November 6, reports CNBC-TV18.

On completion of demerger, equity share capital of IDFC Bank will be held approximately 53 percent by IDFC Financial Holding Company (subsidiary of IDFC) and approximately 47 percent by shareholders of IDFC as on record date. Demerger scheme will be effective on October 1.

At 11:58 hours IST, the scrip of IDFC was quoting at Rs 141.15, up Rs 1.10, or 0.79 percent on the BSE.Posted by Sunil Shankar Matkar