ICICI Prudential, IDFC may back IDFC First’s Rs 2,000 crore issue

BENGALURU: ICICI Prudential Life Insurance and IDFC Ltd may subscribe to a majority of the Rs 2,000-crore preferential issue being planned by IDFC First Bank, as it looks to create a war chest to fight any liquidity crisis emerging from Covid-19.
While ICICI Prudential is expected to invest Rs 500-600 crore, parent IDFC is likely to pump in about Rs 800 crore to maintain its 40% stake, said two sources briefed on the matter.Private equity major Warburg Pincus may bring in Rs 150-200 crore. “The final allocations by various investors could change after the board’s decision,” said one of the sources mentioned earlier. “The capital coming in will be locked in for a year since it’s a preferential allotment.”
The talks come after IDFC First informed stock exchanges on Tuesday that its board will meet on Friday to consider a preferential issue without disclosing details. Emailed queries to IDFC First Bank, IDFC, ICICI Prudential and Warburg Pincus did not elicit a response till the time of going to the press.
The development comes as several banks are expected to shore up capital in the coming months. While Kotak Mahindra Bank has announced a $1-billion capital-raise, reports have said that IndusInd Bank is also in talks with PE firms for a new round.
IDFC Bank and non-banking finance company Capital First combined after the collapse of a $12-billion merger deal between IDFC and Shriram Group — one of the most ambitious M&A deals in the Indian financial services industry — in late 2017. Some minority IDFC shareholders sought better pricing after Shriram offered Rs 60 apiece for the parent and around Rs 48 for the bank.
IDFC First Bank was formed in December 2018, led by Capital First’s V Vaidyanathan. Interestingly, Vaidyanathan, who had earlier led ICICI Bank’s retail business, was also the CEO of ICICI Prudential before the management buyout of Capital First with Warburg Pincus in 2012.
The RBI expects the parent IDFC to retain 40% in the bank for five years. The banking licence granted in the second half of 2015 is nearing the five-year-old threshold.
Since the merger, IDFC First has been looking to increase its retail footprint and bring down the share of infrastructure loans. While the retail loan book has increased from 36% to 49% of total funded assets since the merger, infrastructure and whole loan book are being reduced. IDFC First has also kept Rs 3,487 crore of assets on a watch-list, out of which Rs 2,253 crore are in infrastructure.
The IDFC First Bank stock fell by nearly 1% to Rs 22 on Wednesday, while IDFC closed down 1.2% at Rs 14.5.