IDFC seen benefiting the most from govt budget

Shares up 11.6% for the week after hitting highest in nearly 14 months yesterday

Shares in IDFC Ltd are headed for their best weekly gain since the week after the elections on expectations the infrastructure lender would be among the biggest winners in the budget unveiled this week.

IDFC shares were up 11.6% for the week as of 2:51 pm after hitting their highest in nearly 14 months on Thursday, marking the biggest weekly gain since a 15.4% surge in the week ended on May 23, 2014.

Analysts attributed the share gains to Finance Minster Arun Jaitley's budget proposal to allow banks raising long-term funds to earn some exemptions from requirements that mandate all lenders must deposit cash or bonds with the central bank, although he did not provide details.

IDFC was one of two winners of a banking license in April.

"IDFC has the best knowledge of lending to infrastructure and therefore is positioned to benefit the most along side other lenders from this move," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.

Being exempt from reserve requirements could boost IDFC's return on equity and return on assets by at least 2-3 percentage points, according to analysts, although much will depend on how final rules are implemented.

The infrastructure sector lender had a loan book of nearly Rs 60,000 crore of which nearly half were infrastructure project loans, as per the company's annual report for 2013-14.

IDFC shares rose as much as 4.4% on Friday, adding to Thursday's 8.7% gain after the budget proposal. Shares were last down 1.2% compared with the Nifty's 0.8% fall.