Global private equity giant Warburg Pincus is injecting Rs 200 crore ($26.4 million) into IDFC First Bank to maintain its near-10% stake in the private-sector lender, marking its second India investment of 2020.
A Warburg affiliate is buying 86.24 million shares at Rs 23.19 apiece in the bank via a preferential allotment. This is a tenth of the total Rs 2,000 crore that the bank is raising through the preferential share allotment, a stock-exchange filing shows.
Shares of IDFC First Bank fell 5.5% to Rs 20.70 apiece on Monday morning in a weak Mumbai market.
The PE firm will own a 9.93% stake in the bank after the allotment compared with 9.92% before the issue.
Warburg had got the stake in the bank when non-bank lender Capital First merged with IDFC Bank in 2018. At the time, the PE firm owned a stake in Capital First, which it had acquired in 2012.
The investment in IDFC First Bank is the second India bet for Warburg this year. In February, the PE firm had agreed to invest $150 million in Apollo Tyres Ltd.
Apart from Warburg, IDFC First Bank is issuing shares worth Rs 800 crore to its promoter IDFC Financial Holding Co. Ltd. It is also raising a total of Rs 1,000 crore from three insurers -- Rs 600 crore from ICICI Prudential Life Insurance Co. Ltd and Rs 200 crore each from HDFC Life Insurance Co. Ltd and Bajaj Allianz Life Insurance Ltd. ICICI Prudential and HDFC Life are new investors while Bajaj Allianz is increasing its stake in IDFC First Bank.
The bank said it is already well capitalised with common equity Tier 1 (CET1) ratio of 13.28% at the end of December 2019, which is higher than the regulatory requirements. After raising the fresh funds, the bank’s capital adequacy ratio will be 15.5% and CET1 will be 15.3%.
The bank also said that it will use this capital to grow its business, invest in liabilities and asset franchise, and invest in its technology and infrastructure platforms to expand its reach as well as product offerings. It will also help the bank navigate current market uncertainties, it said.
V Vaidyanathan, managing director and CEO at IDFC First Bank, said the lender has strengthened its position since the merger of Capital First and IDFC Bank.
The bank’s retail lending rose 32% and retail deposits jumped 157% from a year earlier for the nine-month period through December 2019, he said.
The bank’s retail assets increased 32.4% from a year earlier in the fourth quarter to Rs 54,027 crore as on March 31. The share of the retail loan book has grown to 60% from just 10% as of March 2018, Vaidyanathan said.
The bank’s gross non-performing assets stood at 2.26% and net NPA at 1.06% as of December 31, 2019.
