IDFC First Bank to raise Rs 2,000 cr capital from promoter, Warburg Pincus, 3 others

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New Delhi, May 1 () IDFC First Bank on Friday said it will raise a fresh equity capital of Rs 2,000 crore from investors, including its promoter and a Warburg Pincus firm.

The decision was taken on Friday at the meeting of its board, which approved to issue 86.24 crore shares on a preferential basis to ICICI Prudential Life Insurance Company, HDFC Life Insurance Company, Bajaj Allianz Life Insurance, Dayside Investment (Warburg Pincus group entity), and to its promoter IDFC Financial Holding Company Ltd, the bank said in a regulatory filing.

Under the fundraising, the equity shares will be issued at Rs 23.19 apiece to the existing and new investors, subject to shareholders' nod and other approvals.Advertisement

"The bank will use this capital to power growth, to continue to invest in liabilities and asset franchise, technology and infrastructure platforms to expand reach, product suite and to improve customer experience," it said in a release.

Under this fresh fundraising, qualifying for common equity tier 1 or CET1, the bank will get Rs 800 crore from its promoter IDFC Financial Holding Company Ltd, while Rs 600 crore will be infused by ICICI Prudential Life Insurance Company.

HDFC Life Insurance Company, Bajaj Allianz Life Insurance Ltd and the US-based private equity fund Warburg Pincus group-affiliate Dayside Investment Ltd will pump in Rs 200 crore each into the bank.
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The promoter will acquire 34,49,76,282 shares and ICICI Prudential Life 25,87,32,212 units, while the rest of the three investors will buy 8,62,44,070 shares each.

The private sector lender said the new capital infusion will strengthen its capital adequacy to 15.5 per cent with CET 1 ratio at 15.3 per cent (calculated on December 31, 2019, base of 13.28 per cent, substantially higher than the regulatory requirements). This will enable the bank to accelerate growth of its deposit and asset franchise, it added.Advertisement

V Vaidyanathan, managing director and chief executive officer, IDFC First Bank, said, "Within one year after merger (of Capital First), the bank has made strong progress across all strategic priorities and set a strong foundation for growth. The new fund with strong capital adequacy will enable us to continue to power up growth in the chosen areas. It also empowers us to navigate current market uncertainties from a position of strength."

He said that in one year of merging Capital First with itself, the bank's retail lending grew 32 per cent year-on-year and retail deposits were up 157 per cent year-on-year.

The merger took place in December 2018.Advertisement

The bank's net interest margin (NIM) increased sharply to 3.86 per cent in the third quarter of 2019-20 ended December 2019 and is expected to continue rising. The bank has built strong intellectual property in its business in a focussed manner and the opportunities for growth for the lender are unlimited, Vaidyanathan said.

Having recently been rated 'FAAA' by rating agency Crisil for its fixed deposit programme of Rs 50,000 crore -- the highest safety rating by Crisil in this category, he said that with the new equity capital raise, the position is further strengthened and will help the bank raise more retail current account-saving account (CASA) and retail deposits and thereby reduce the overall cost of funds for the bank.

During the fourth quarter ended March 2020, retail assets increased 32.4 per cent year-on-year to Rs 54,027 crore, it said.Advertisement

The lender's retail loan book as a proportion of total loans grew from 10 per cent as of March 2018 (pre-merger) to 60 per cent as on March 31, 2020, (including retail priority sector lending) and is running ahead of the 5-year guidance of 70 per cent given at the time of merger.

The bank has reported strong retail asset quality with gross non-performing assets (NPA) at 2.26 per cent of the gross advances and net NPAs at 1.06 per cent at the end of the December 2019 quarter.

IDFC First Bank said Dayside Investments Ltd along with Cloverdell Investment Ltd --both Warburg Pincus LLC Group entities -- together holds 47,72,64,867 equity shares, constituting 9.92 per cent of the pre-issue shareholding and 56,35,08,937 equity shares constituting 9.93 per cent of the post-issue shareholding of the bank.Advertisement

The total number of the bank's paid-up equity shares will be 567,23,43,720 after the issue, it said.

"The net worth of the bank post the issue and as added to the net worth as of December 31, 2019, will be Rs 17,240 crore," IDFC First Bank said. The lender said the said preferential allotment shall be subject to approval of the members of the bank proposed to be sought through postal ballot by way of 'Remote E-Voting' in terms of the applicable circulars recently issued by MCA (April 2020) in view of the current extraordinary circumstances due to the COVID-19 pandemic requiring social distancing and also in accordance with relevant Sebi norms. KPM HRS
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