Private equity firm Warburg Pincus and Abu Dhabi Investment Authority, a sovereign wealth fund of the Gulf emirate, will invest a total of Rs 7,500 crore (about $877 million in IDFC First Bank, the Indian lender said Thursday.
IDFC First Bank said in a statement its board approved a preferential issue of equity capital amounting to about Rs 4,876 crore to an affiliate of Warburg Pincus and Rs 2,624 crore to a wholly owned unit of ADIA.
The proposed issues are subject to shareholder and regulatory approvals, the bank said.
“We believe the Indian banking sector presents an exciting opportunity and is poised for long-term growth,” said Vishal Mahadevia, managing director, head of Asia PE and global co-head of financial services at Warburg Pincus.
The bank said the fundraise will help drive its next phase of growth and that its overall capital adequacy will increase from 16.1% to 18.9%, strengthening its balance sheet and “positioning it for strong and self-sustaining profitable growth”.
The latest funding marks a return to IDFC’s cap table for Warburg Pincus.
The PE firm spent around Rs 940 crore to get a controlling stake in Capital First during 2012-2014. In 2018, Capital First merged with IDFC Bank to create IDFC First Bank and Warburg Pincus got an around 10% stake in the merged business.
Warburg exited the bank in tranches. In December 2023, the PE firm sold part of its stake in the bank for Rs 790 crore ($95 million). It sold its remaining stake last year.
IDFC First Bank's net profit rose to Rs 2, 957 crore in FY24 from Rs 1,944 crore in FY19. However, the net profit fell 45% year-on-year to Rs 1,221 crore in the first nine months of FY25 due to asset quality stress in the microfinance industry. The microfinance crisis led to a rise in the bank's credit provisions. In turn, the bank reduced its MFI portfolio, and this impacted income.
The bank said the impact of the microfinance crisis is tapering off and that collection efficiency is improving.
It also said that it will utilise the latest funding to scale up businesses like credit cards, cash management, and wealth management, among others. The bank proposes to grow the overall loan book at 20% for the next few years.
“The bank has firmly moved into profits and is now at a pivotal stage, where our income growth is expected to consistently exceed opex (operating expenditure) growth, leading to improved operating leverage. We expect many businesses which are in the investment stage to turn profitable with scale,” said V Vaidyanathan, managing director and chief executive officer, IDFC First Bank.
