BoB Capital sees nearly 24% upside in IDFC First Bank stock; says banks strategic approach to becoming IDFC 2.0 will augur well

BoB Capital is bullish on IDFC First Bank's stock as it believes the bank's strategic approach to becoming IDFC 2.0 will augur well. The brokerage has given a 'buy' call on IDFC First Bank stock and has given a target price of Rs 96 apiece, which is an upside of nearly 24 per cent from Wednesday's closing price of Rs 77.48 per share. 

Analysts at BoB Capital expect strategic growth in the loan book to be driven by small- and medium-sized enterprises and retail portfolios, which are likely to aid net interest margin (NIM). 

Furthermore, as per the report, better operational efficiencies would be key to improving the return on asset/return on equity (RoA/RoE).

IDFC First Bank has seen a turnaround post COVID-19 pandemic, with its business dynamics and asset quality improving substantially, as partly reflected in the valuation rerating over the past year. 

Moreover, as per the report, the bank is well capitalised with a capital adequacy ratio (CAR), an indicator of how well a bank can meet its obligations, of 16.7 per cent, which will likely support business growth. 

Analysts peg ROA at 1.4 per cent, and ROE at 14 per cent by FY26 vs. ROA/ROE of 1.1 per cent/10 per cent in Q3FY24.

IDFC- IDFC First Bank merger 

In December 2023, the Reserve Bank of India (RBI) gave its nod for the reverse merger of IDFC Ltd with its banking subsidiary, IDFC First Bank.

As part of the composite scheme of amalgamation, IDFC FHCL would first merge with IDFC and then IDFC into IDFC First Bank Ltd. The scheme remains subject to other statutory and regulatory approvals, including from the National Company Law Tribunal and the respective shareholders and creditors of the companies involved under the applicable laws, it said.

Under the proposed reverse merger scheme, an IDFC shareholder will get 155 shares for every 100 shares they hold in the bank. 

Both stocks have a face value of Rs 10 each.

At around 2:14 p.m., shares of IDFC First Bank shares traded 0.19 per cent higher at Rs 77.63 apiece. 

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