IDFC First Bank addresses concerns over Vodafone Idea exposure in annual report

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Amid concerns over the bank’s asset quality that could be impacted the most from the troubles faced by Vodafone Idea (Vi), private lender IDFC First Bank in its annual report addressed the concerns that some of the investors would have about its exposure to the cash-strapped telecom service provider.

In a note to its shareholders, IDFC First Bank Managing Director and CEO V Vaidyanathan said “I would now like to directly address the concerns that some of you would have about our exposure to Vodafone Idea. Let us hope the government supports the industry; out of the total dues of the company about ₹1.5 lakh crore are owed to the government itself and hence they will be keen to solve this issue. In any case, we have a lot of growth capital by our side."

While other lenders also have high exposure to Vodafone in absolute amounts, Yes Bank and IDFC First are likely to be impacted the most as they top in terms of percentage of their loan books.

“We will peruse the matter through law of the land. With a strong liability base consisting of low-cost CASA of 50%+, we get good margins in our business. We can compound our advances continuously by about 25% for a long time, and we can build this book to any size of our desire in our lifetimes, it could be ₹2 lakh crore, ₹5 lakh crore, ₹10 lakh crore or more," Vaidyanathan added.

He added that the bank will ride it through without impacting its long-term future and build a great bank from here. “So we will keep our eyes riveted on the longer story. We have experienced such situations earlier and have always learnt that if we have a strong and profitable model and go on for extended periods of time, then a one-off incident does not dent the long-term story."

Vodafone Idea is in an urgent need to raise funds to deal with its liabilities and pay dues as its situation remains an overhang after the Supreme Court rejected its appeal to allow the payment of self-assessed adjusted gross revenue (AGR) dues and Kumar Mangalam Birla’s resignation as Chairman after his offer to hand over Aditya Birla group’s stake to the government.

IDFC First’s Head of Investors Relations said that the bank is doing well on all core building blocks. However, after Vodafone Idea Chairman’s letter to the government came to light in early August, its stock has continuously been under pressure and has come down sharply to early 40s.

The bank believes that the government will solve the problem to keep this a competitive telecom market, however irrespective of the outcome, it is already prepared, and “the bank has strong capital buffers to deal with the situation.”

“We are committed to creating value for our shareholders and we are confident that in the medium to long run our performance will reflect that and it will be appreciated. We are encouraged with the response of the shareholders for performance over the last 24 months, barring only this issue of exposure to Vodafone Idea which has significantly affected our stock price in recent time. We hope that clarity on this matter emerges soon," IDFC First Bank’s annual report stated.

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IDFC First Bank share price: Buy IDFC First Bank, target price Rs 52: Yes Securities

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Guest contributor and other agencies Promoters held 40 per cent stake in the company as of March 31, 2021, while FIIs held 11.9 per cent, DIIs 10.5 per cent and public and others 36.9 per cent.

IDFC First Bank

IDFC First Bank Ltd., incorporated in the year 2014, is a banking company (having a market cap of Rs 29110.06 Crore).

Financials

For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 4938.03 Crore, up 2.15 % from last quarter Total Income of Rs 4834.19 Crore and up 11.89 % from last year same quarter Total Income of Rs 4413.20 Crore.

Did you Know? Stock score of IDFC First Bank Ltd moved down by 1 in a month on a 10-point scale. View Latest Stock Report » Investment Rationale

After losing 29 per cent from the June month’s high, the stock is bouncing off its support zone seen near Rs 44. Appearance of a long legged bullish candle could mean that the stock is due for mean reversion; hence, a rally towards Rs 52 is possible.

Promoter/FII Holdings

Promoters held 40 per cent stake in the company as of March 31, 2021, while FIIs held 11.9 per cent, DIIs 10.5 per cent and public and others 36.9 per cent.

Yes Securities has buy call onwith a target price of Rs 52. The current market price of IDFC First Bank Ltd. is Rs 46.85. Time period given by analyst is Intra Day when IDFC First Bank price can reach defined target.IDFC First Bank Ltd., incorporated in the year 2014, is a banking company (having a market cap of Rs 29110.06 Crore).For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 4938.03 Crore, up 2.15 % from last quarter Total Income of Rs 4834.19 Crore and up 11.89 % from last year same quarter Total Income of Rs 4413.20 Crore.After losing 29 per cent from the June month’s high, the stock is bouncing off its support zone seen near Rs 44. Appearance of a long legged bullish candle could mean that the stock is due for mean reversion; hence, a rally towards Rs 52 is possible.Promoters held 40 per cent stake in the company as of March 31, 2021, while FIIs held 11.9 per cent, DIIs 10.5 per cent and public and others 36.9 per cent.

(Disclaimer: Views and recommendations given in this section are the analysts' own and do not represent those of ETMarkets.com. Please consult your financial adviser before taking any position in the stock/s mentioned.

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