IDFC First Bank's promoter, Warburg may not participate in fundraising

Board clears Rs 3K-cr capital raise plan

The board of IDFC First Bank has approved a plan to raise Rs 3,000 crore by way of a private placement, qualified institutional placement (QIP), follow-on public offering, or a combination of these to help spur growth at the bank, but the promoter, IDFC Financial Holding Company Ltd, may not take part in the fundraising.

Sources in the know said the bank was gearing up to roll out a QIP by the end of the current fiscal year (March 2021).

“QIP seems to be the preferred mode, and bankers to the issue are likely to be appointed next week. The objective is to ensure that the capital raise is completed this fiscal year,” said a person aware of the development.

IDFC Financial Holding, a step-down subsidiary of IDFC Ltd, which owns 40 per cent in IDFC First Bank, may refrain from subscribing to the issue. Likewise, Warburg Pincus, which holds a little more than 9 per cent in the bank, may not participate in the capital raise. “There have not been formal discussions yet with these investors on the matter, though it is unlikely that they will subscribe to the issue this time,” said another highly placed source.

In May last year, when the bank raised Rs 2,000 crore through a preferential issue, IDFC Financial Holding and Warburg Pincus infused Rs 800 crore and Rs 200 crore, respectively. While the promoter maintained its stake at 40 per cent after the issue, the US private equity major raised its stake in the bank by 1.62 per cent. A spokesperson for IDFC First Bank refused to comment on the equity infusion plans.

Shares of IDFC First Bank soared to a three-year high on Friday on news about the fundraising. The stock closed at Rs 62.46, up 7.5 per cent over the previous day’s closing price. It has gained 24 per cent since January, and doubled in the past six months.

It is also gathered that foreign investors with long-only funds may participate in the QIP.

 “Based on the initial feedback from potential investors, some foreign funds already invested in banks such HDFC Bank and ICICI Bank have evinced interest in picking up a stake in IDFC First Bank. However, discussions are at an early stage,” said the first person quoted above.

The equity infusion is expected to increase the bank’s capital adequacy to 16 per cent from 14.3 per cent as on December 31, 2020. The tier-1 equity capital will increase from 13.82 per cent to 15.5 per cent after the fund infusion. The capital raised will be deployed towards the bank’s growth opportunities, according to the bank's press statement.