InvestorQ : How is IDFC Bank planning to strengthen its balance sheet and is the stock a good buy at current prices?
Chandralekha Desai made post

How is IDFC Bank planning to strengthen its balance sheet and is the stock a good buy at current prices?

Answer
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Mitali Bhutta answered.
5 months ago


IDFC First Bank Ltd. is planning to raise Rs.2000 crore via preferential allotment of shares to shore up its capital base. This money will be used to strengthen the bank’s capital buffers further. Shares will be issued to local and overseas investors in the form of preferential allotment and any gaps may be filled by a rights issue. The bank has seen its provisions rising and its losses widening ever since it merged with Capital First in Dec-18. IDFC Bank’s CET-1 ratio has fallen from 15.27% to 13% in the last 1 year while capital adequacy ratio has fallen from 15.47% to 13.28% now. This is still above the statutory levels. IDFC Bank needs capital to provide for bad loans, which could worsen in the ongoing lockdown. IDFC Bank already has loans worth Rs.3487 crore in its watch-list; predominantly infrastructure financing. However, the bank is apprehensive that COVID-19 could worsen its capital adequacy. It also has a large exposure to telecom sector that has been under tremendous strain. IDFC Bank has sharply lowered its corporate funding book and also the infra financing book. The capital raising should help.