IDFC First Bank, a Mumbai-based private sector lender, is gearing up for a significant capital boost as its board approved a preferential issue of equity capital amounting to ₹7,500 crore (approximately $900 million) on Thursday, April 17, 2025. This financing will come from two prominent investors: Currant Sea Investments B.V., an affiliate of Warburg Pincus, and Platinum Invictus B 2025 RSC Ltd, a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA).
The bank's board has sanctioned the allotment of 81.26 crore compulsorily convertible preference shares (CCPS) at ₹60 per share to Currant Sea Investments, which is set to invest ₹4,876 crore. Platinum Invictus will contribute ₹2,624 crore through the purchase of 43.71 crore shares. This capital infusion is subject to the necessary shareholder and regulatory approvals.
V. Vaidyanathan, Managing Director and CEO of IDFC First Bank, expressed optimism about the investment, stating, "It is great to have Warburg Pincus back and to welcome a wholly owned subsidiary of ADIA as our shareholder. We thank them both for believing in us and our future growth plans and for investing in us even under volatile global situations." He also noted that the bank is at a pivotal stage, where income growth is expected to consistently exceed operational expenditure growth, leading to improved operating leverage.
In the past six years, IDFC First Bank has transformed from an infrastructure-focused development finance institution to a modern, technology-driven universal bank. During this period, deposits have grown sixfold, while loans and advances have doubled. The bank's current account-savings account (CASA) ratio has surged from 8.7% to 47.7%. The profit after tax (PAT) has also flipped from a ₹1,944 crore loss in FY19 to a profit of ₹2,957 crore in FY24.
However, the bank's profitability faced challenges in the first nine months of FY25 due to industry-wide issues in microfinance. Despite these hurdles, the recent capital raise is expected to bolster the bank's overall capital adequacy ratio, which is projected to increase from 16.1% to 18.9%. The core equity tier-1 ratio is estimated to reach approximately 16.5%, based on the bank's capital position as of December 31, 2024.
As the news broke, shares of IDFC First Bank experienced a downturn, slipping 4% to ₹60.70 on the Bombay Stock Exchange (BSE) during Thursday's trading session. The stock was trading at ₹63.53 earlier in the day but fell amid profit booking, as a combined 54.13 million equity shares changed hands on the National Stock Exchange (NSE) and BSE. The decline in share price came after the bank's announcement of the fundraising plan, reflecting investor sentiment amid the ongoing volatility in the market.
Analysts have noted that IDFC First Bank's stock has seen a correction of 47% from its all-time high over the past 81 weeks. Anshul Jain, Head of Research at Lakshmishree Investment and Securities, commented that the stock is currently forming a base and that a sustained move above ₹65 could signal a potential recovery.
Vishal Mahadevia, Managing Director and Head of Asia Private Equity at Warburg Pincus, emphasized the exciting opportunities within the Indian banking sector, stating, "We are excited to reinvest behind the IDFC First Bank team to support them in the next phase of growth and sustainable return on equity improvement." Hamad Shahwan AlDhaheri, Executive Director of the Private Equities Department at ADIA, echoed this sentiment, highlighting the investment's goal of supporting the bank's continued growth and meeting the rising demand for financial products in India.
IDFC First Bank operates 971 branches across over 60,000 locations in India, offering a comprehensive suite of services that includes retail banking, micro, small, and medium enterprises (MSMEs), rural banking, corporate banking, wealth management, and treasury solutions. The bank's customer deposits have been growing at a rate of 25.2% year-on-year, while loans and advances have increased by 20.3% year-on-year, as of March 31, 2025, according to provisional disclosures.
As the bank embarks on this new chapter with substantial backing from Warburg Pincus and ADIA, it aims to enhance its market position and continue its trajectory of growth. The successful execution of this fundraising initiative is poised to strengthen the bank's balance sheet and support its ambitions for self-sustaining profitable growth.
