IDFC First Bank announced on Saturday (November 5) that its board has approved a proposal to fundraise Rs 4,000 crore in capital over the course of the following year.

With the aim of further strengthening the balance sheet, the aforementioned funds will be raised in one or more tranches by way of the issuance of equity shares or tier 1 capital. The bank’s tier 1 capital ratio is at 13.6 percent for Q2FY23 and the total capital adequacy ratio (CAR) is at 13.3 percent,

Giving more insights on the rationale behind IDFC First Bank going for a fundraise despite having a more than efficient capital adequacy, V. Vaidyanathan, MD & CEO, IDFC First Bank, told CNBC-TV18 that the bank posts profit worth Rs 550 crore every quarter hence the real requirement may be less than Rs 4,000 crore and the current fundraise is a part of the capital planning exercise.

“We are a bank and we do capital planning exercises from time to time. And as per our capital planning exercise, we thought that in the next one year, we would like to raise some capital, maybe a real requirement will be less than that and that’s what we have put out in the public domain,” he said.

Also read: IDFC First Bank expects loan growth of 20-25% for FY23

He added that the capital raise is for over a year, not necessarily immediate — but that amount of capital could give the bank a lot of headroom for growth in the future.

IDFC First Bank reported a strong 266 percent growth in profitability at Rs 556 crore in July-September compared to a profit of Rs 152 crore in the corresponding period last year.

Strong expansion in the bank's core operating income was the main driver of profitability. The bank's asset quality increased, and interest revenue expanded significantly.

Also read: IDFC First Bank Q2 result: Net Profit jumps 266% to Rs 556 crore

“We have demonstrated over the last 4 quarters that our asset quality is absolutely superb. Our gross NPA on the retail side alone is like 2 percent, net NPA is only 0.7 percent. Our SMA, which is a portfolio that is moving into NPA, is only 1 percent, both SMA-I and SMA-II. So that gives a colour that asset quality is already fantastic,” said Vaidyanathan.

During the quarter, the net interest income (NII) climbed 32 percent to Rs 3,002 crore from Rs 2,272 crore in the corresponding period a year ago and the net interest margin expanded to 5.98 percent from 5.83 percent in the quarter ended September 2021.

The shares of IDFC First Bank closed at Rs 57, up by 0.3 percent from the previous close on the BSE.

Also read: Bank report card: ICICI and Kotak see strong growth, slippages up for RBL & IDFC First

(Edited by : Shoma Bhattacharjee)

First Published:Nov 7, 2022 7:08 PM IST