IDFC First Bank CEO and Managing Director V Vaidyanathan said in an exclusive interview that the entire proceeds from the sale of a portion of his stake to GQG Partners were reinvested in the bank. One of India's truly new generation banks, IDFC First Bank informed on Monday that GQG Partners, a US-based boutique investment firm, has made a significant investment in the Bank acquiring about 4.7 percent stake.

GQG Partners has now hiked its stake in IDFC First Bank through a couple of deals, including the above said Rs 479.50 crore block deal. Following this, the price of the Bank's shares witnessed a rise of over 2 percent on September 11.

Earlier, according to bulk deals data on the BSE, GQG Partners had also acquired a 2.6 percent stake in IDFC First Bank for a substantial sum of Rs 1,527 crore.

Sharing his perspective in response to this significant investment by GQG Partners in the Bank with CNBC-TV18, Vaidyanthan affirmed that the entire proceeds from his share sale were being reinvested into the bank, emphasising the bank's commitment to growth and expansion. Below is the edited excerpts from his interview:

Q: If you can just explain the rationale of the sale.

A: There was an option given to me by Capital First as part of the CMD stock options at pretty much at the inception state of Capital First, and even later at various prices. These options are close to expiry now and I need to pay Rs 229 crore to the bank for subscribing to these options. And I need to pay Rs 240 crore as income tax because the stock has a sufficient value. I've also had some pre-committed social costs of Rs 9.2 crore. So basically we got sale proceeds of Rs 478.7 crore by sale to GQG, and I have used all of it for these three purposes.

Q: Could you tell us what is your current stake, post this exercise of option?

A: My stake has increased to 1.04 percent including what I hold in my direct name as well as what I'm holding in a social trust.

Q: How much does GQG hold now in total?

A: They have to talk for themselves. But to the best of my knowledge, it would be something like about 4.7 percent.

Q: Anything more here we should expect with regards to - or they would stay under 5 percent because there are rules which say that to go above 5 percent, you need nod from the regulator as well?

A: That's right.

Q: So they will stay under 5 percent as you understand it as of now?

A: That’s right.

Q: And do you have any further plans to sell your stake?

A: No question at all, because as I told you I want to just make it very clear to everybody since we are a well governed company and I owe proper explanation, this sale has been directly reinvested back in the bank. This is very important to note. No part of the sale has been used for personal consumption, no part of the sale is for any other purpose of making any other investment. The entire investment has come back into the bank or has been used to paying tax. So, I will be paying Rs 229 crore to the bank as I will be investing it back in the bank as equity and Rs 240 crore I will pay as tax.

Q: Warburg still holds about 3 percent stake, right? Is there any communication from its end?

A: No communication. I don't know about the 3-4 percent or something like that.

Q: Hope the business looks good and the 25 percent loan growth in FY24 on track?

A: All on track and this is the last month of the quarter. So I should be careful. So please don't push me too hard on the numbers. But, absolutely all the numbers we talked about in terms of loan growth, deposit growth, all that are absolutely on track.

Q: On the NBFC front, we recently spoke with the management of Piramal Finance. And they said that in the unsecured segment there perhaps is some trouble brewing and that could be months away. What's your thoughts on this segment? What is your Bank's exposure to it?

A: We (IDFC First Bank) are doing superbly well. (As far as unsecured loan segment is concerned) we are very cautious. We will continue to be very cautious basically if you remember we do cash flow financing. And this is very important. It's like escrow. And we are conscious of our numbers, and we're doing very well too. Nothing to worry on that front.

Q: What is the exposure though?

A: I think we should move ahead.

For more details, watch the accompanying video

(Edited by : C H Unnikrishnan)

First Published:Sept 11, 2023 1:18 PM IST