IDFC FIRST Bank on Thursday announced that its board of directors have approved a fund raise of approximately Rs 7,500 crore by issuing preferential shares to affiliate firms of Warburg Pincus and the Abu Dhabi Investment Authority (ADIA). In a regulatory filing, the Bank said that Currant Sea Investments B.V., an affiliate company of Warburg Pincus LLC, will invest Rs 4,876 crore for a stake of 9.8 per cent and Platinum Invictus B 2025 RSC, a wholly-owned subsidiary of ADIA, will invest about Rs 2,624 crore for a 5.10 per cent stake.
Over the last six years, IDFC FIRST Bank said, it has undergone a successful transformation from its legacy as an infrastructure-focused DFI to becoming a modern, technology-driven, pan-India, universal bank. In the process, it has made significant investments in distribution, technology, and talent to become a leading private sector bank in India.
During this time, deposits for the Bank went up by 6x, loans and advances doubled, and CASA ratio has significantly improved from 8.7 per cent to 47.7 per cent. PAT rose from a loss of Rs 1,944 crore in FY19 to a profit of Rs 2,957 crore in FY24. However, profitability dipped in 9MFY25 due to industry wide challenges in microfinance, which the bank has navigated well. With this fund raise, it said, “The overall capital adequacy will increase from 16.1 per cent to 18.9 per cent, (CET-1 ratio at ~16.5 per cent, calculated on the capital position of the Bank as of December 31, 2024), strengthening the Bank’s balance sheet and positioning it for strong and self-sustaining profitable growth,” it said.
V Vaidyanathan, Managing Director & CEO, IDFC FIRST Bank, said, “From day one, we have always built our foundation of the Bank with a long-term vision of building a world class bank in India. We are building a culture of empathy for customers and strive to offer the highest levels of customer service. We are technologically advanced and continue to stay cutting-edge.”
Vishal Mahadevia, Managing Director, Head of Asia Private Equity, and Global Co-Head of Financial Services, Warburg Pincus, said, “We believe the Indian banking sector presents an exciting opportunity and is poised for long-term growth. We have known the IDFC First Bank team for over a decade dating back to their early days and have closely seen the build out of the bank. We are excited to re-invest behind the IDFC First Bank team to support them in the next phase of growth and sustainable ROE improvement.”
Hamad Shahwan AlDhaheri, Executive Director of the Private Equities Department at ADIA, said, “IDFC First Bank has firmly established itself as one of India’s leading private sector banks, backed by a seasoned management team. It has expanded both its technology and branch infrastructure over a number of years and is well positioned for the future. This investment is aimed at supporting the bank’s continued growth, enabling it to meet the rising demand for financial products in the country.”
IDFC First Bank said that the rationale behind the fund raise included:
1. The Bank has set up a branch network, ATMs, brand and technology to build a stable deposit franchise. Bank launched multiple businesses like credit cards, cash management, wealth management, etc. to be a full-fledged universal bank. These businesses need to be scaled up for optimal profitability.
2. Further, the Bank proposes to grow the overall loan book at ~20 per cent for the next few years.
3. To enable such scale up, the Bank is raising the required capital for growth.
4. The large fund raise will increase the capital adequacy and reduce the need for frequent fundraising at the Bank.
5. This high capital adequacy will position the Bank for strong and profitable growth
Proposed transaction
IDFC First Bank is planning to raise around Rs 7,500 crore of fresh equity capital through issuance of Compulsorily Convertible Preference Shares (CCPS) at a price of Rs 60 per share. CCPS amounting to around Rs 4,876 crore to be issued to Currant Sea Investments B.V., an affiliate company of Warburg Pincus LLC, and CCPS amounting to ~Rs. 2,624 crore to be issued to Platinum Invictus B 2025 RSC Limited, a wholly owned subsidiary of Abu Dhabi Investment Authority (ADIA), managed by its Private Equities Department. “The proposed issues are subject to shareholder and regulatory approvals,” it said in a regulatory filing.