Jefferies has reiterated its ‘Buy’ rating on IDFC First Bank, setting a target price of ₹73, indicating upside from the current market price of ₹62.98. The brokerage highlighted the bank’s recent move to raise ₹7,500 crore (₹75 billion) via compulsorily convertible preference shares (CCPS) from marquee investors Warburg Pincus and ADIA-PE, calling it a significant capital infusion that could materially strengthen its balance sheet.
The CCPS will convert into equity if the stock trades above ₹60 for 45 consecutive trading days, with a conversion price fixed at ₹60. This deal is larger than Jefferies’ earlier estimates of capital requirements — ₹30 billion in FY26 and ₹40 billion in FY27 — and is expected to boost the bank’s Tier I capital adequacy ratio (CAR) to around 14%, providing adequate headroom for growth.
Jefferies does flag that return on equity (ROE) could come under pressure in the near term, projected at 8–10% over FY26–27, as dilution effects play out. However, the capital access is seen as crucial for supporting approximately 20% loan growth, particularly in its retail loan and deposit franchise, which remains healthy.
That said, the report notes that the microfinance (MFI) portfolio continues to face headwinds, a segment that the bank will need to manage carefully going forward.
With strategic investors backing and strong capital buffers, Jefferies believes IDFC First Bank is well positioned for its next growth phase.
Disclaimer: The above views are of the broker’s and not the author or the publication’s. Please make any and every investment decision after consulting your financial advisor.
