I think all things apart the PPOP is very disappointing.
What is this except microfinance thing. Lets ssay that he will have bumper profits next year in Microfonance will he still say except Microfinance?
Please show what would your Net profits be except Microfinance for the two years too. Lets take microfinance out from the equation, the NIMs will take a hit big time too. Like to like comparision should be through out not just for the parameters its showing better results unless you wont do microfinance business from hereon all together like Infrastructure book.
The biggest concern is giving a dividend of 0.25 rupees when they just raised 7500 crores for growth and ROEs that are really below par.
The core PPOP has actually come down this quarter for year on year comparision as against 20% growth in asset book.
Have they stopped sharing that guidance 2.0 in their presentation which talked about ROA of 1.9 and PAT of 12000-13000 by 2029�? 
.
They also promised ROA of 1.4 by 2027âŚ
His prediction about this quarter ( Q4 of 2025) was âwell above 1000 crore PATâ âŚ
So it is good if they have stopped predictingâŚ
I agree provisioning in banks provides tax shelter. Money remains in the bank and gets back into the lending cycle.
Provisioning is also has a bit of subjective angle becuse you can always do more and say this is a contingency provision or a floating provision or a covid provision. This of course lowers PAT .
There is a fine line here of . Bank managements that want to ramp up stock price in short term will under-provision and those that are only worried about it in medium term or long term will over provision. The second scenario helps compound book value better in the long term.
Icici has learnt this game from hdfc bank and now does it well.
This bank might give very good returns between FY27 to FY30. Pl explain why this line
Seeing current numbers, it looks like FY26 also wonât see much operating leverage.
- Given theyâve guided for 65% C:I by FY27, Iâm assuming theyâll achieve at least 67% and hopefully will improve in the subsequent 2-3 years
- By then, the base would have increased even more and the NIMs would have stabilised
- Theyâll also receive the insurance amount for a lot of MFI NPAs in FY27
- Their SA and FD rates would be much lower than now, and just be marginally better than other pvt. banks, therefore lower CoF
But these are all based on assumptions and hope. The major point I wanted to drive was that for now this stock doesnât look much lucrative. Maybe in in those future years it might become.
Can you explain what u have said in little detail?
I think once credit card and retail business breakeven we can see operating leverage playing out.
âCredit Card business has achieved operational break-even
in just 4 years indicating a highly successful scale-upâ
Next quarter onwards it will show profit.
For retail business the losses are -1.2%
Breakeven is not far.
âWith increasing scale, the Pre-provisioning Operating
losses as % of average retail deposits have improved
from (4.2%) in FY20 to (1.2%) in FY25â
The growth in last few quarters was good. Just that the management chose to allocated a generous sum to provisioning. Which is good, keeps the profits in the loop, saves taxes.
https://www.financialexpress.com/market/idfc-first-bank-in-focus-warburg-pincus-seeks-cci-nod-to-buy-10-3829767/ Is warburg pincus is seeking permission to buy another 5% in the bank. Because if i am not wrong they have bought 5% stake during last week only in Rs 7500/- Cr capital raise. I this seems to be the permission which they might have asked for previous Rs7500/- Cr round only.
This is for last weekâs capital raise. From this link itself:
âAs per the regulatory filling submitted on April 28, Warburg Pincus plans to pick up a 9.99% stake by subscribing to over 81 crore compulsorily convertible cumulative preference shares of IDFC First Bank. This investment, if cleared, would give the firm a foothold in one of Indiaâs rising private lenders.â
Yup - Thatâs precisely what I posted 
See: Description of resolution considered in the screenshot.
Rejection of a proposal in shareholders ballot is an unusual occurrence. Does somebody know why this proposal has been rejected ??
yes looks like very unusual Shareholders reject board seat to Warburg-backed investor in IDFC FIRST Bank
âThis opposition from institutional shareholders proved decisive, despite support from retail (non-institutional) shareholders, who backed the move with nearly 99 percent of their votes.â
The rejection of Warburgâs board nomination raises questions about investor concerns within the bank and the long-term alignment between private equity stakeholders and public shareholders. This is also the first major instance of dissent among shareholders in a private bank.
Notably, the occasion when such a marked opposition was seen in the financial services sector was in 2018, when about 22.64 percent of HDFC Limitedâs shareholders voted against Deepak Parekhâs reappointment as a non-executive director in the then mortgage behemoth.
Can it be due to the information of MFI delinquencies passed onto Warburg by end of 2023 and they made an early exit at the top even before it was made public?? I sure think so..
The resolution uses the word â non retiring non executiveâ . The problem area is â non retiringâ. Couple this with the fact that wsrburg and VV go long back. Gives him extra votes on the board.
Why dies warburg want a non retiring exec director?
In October 2023, IDFC First Bank had raised Rs 3,000 crore via a qualified institutional placement issue at Rs 90.25 per share. Now, Warburg Pincus is reinvesting at a discount to the price of sale by its affiliate Cloverdell Investment. Last March, Cloverdell Investment exited IDFC First Bank at Rs 75.24 per share.
This just feels NOT good. This goes into the history, forever!
It looks like, the key objection is âNon-Retiringâ
Long read on IDFC both raising money and announcing a dividend at the same time
â
The idea of a company giving out a dividend is that it has âexcess cashâ that it can return to its shareholders. The company is presumably doing well, has invested in whatever assets it needs for the next few years, is earning a healthy profit, and wants to make investors happy by returning some of their money.
The idea of a company raising money from investors is the opposite. It needs money to do things. It could be to get more customers, move into new business lines, etc. Giving out a dividend and raising money from investors are ideas at odds with each other. A company canât both have excess cash and need external money to be able to do stuff.
Last month IDFC First Bank announced a fund-raise:
Private equity major Warburg Pincus and sovereign fund Abu Dhabi Investment Authority (ADIA) have agreed to invest âš7,500 crore in IDFC First Bank for close to 15% stake, delivering a capital boost for the private lender accelerating its credit cards and wealth management businesses.
The bank will issue compulsorily convertible preference shares (CCPS) worth âš4,876 crore to a Warburg Pincus affiliate, and shares worth âš2,624 crore at âš60 each to an ADIA subsidiary. While the Warburg affiliate will hold 9.48% stake, the ADIA unit will hold 5.10%.
And almost immediately after that, the bank came back announcing a dividend:
[âŚ] recommended dividend of âš 0.25/- (2.50% of face value) per equity shareâŚ
IDFC is raising âš7,500 crore ($900 million) from investors and turning around and giving away âš183 crore of that to its shareholders. [1] Warburg Pincus and the Abu Dhabi Investment Authority (ADIA) are the ones buying the shares paying âš60 per share for a combined 14.5% stake in IDFC First.
The market price at the time of announcement of this deal was âš63, so the two investors got about a 5% discount. Thatâs not a lot! Anyone buying a stake as large as this would expect a discount, and 5% is on the lower end of what would be reasonable.
But there are two unknowns:
- Why would the two new investors be okay with the company flipping cash theyâve just raised over to the rest of the shareholders?
- The last time IDFC gave out a dividend was 7 years ago. Why would IDFC want to randomly give out a dividend right now even though it needs the cash?
For (1) I really donât know. Maybe they werenât okay with it but IDFC didnât care? They probably wouldâve wanted to negotiate a larger discount had they known that the bank would be distributing money.
For (2) thereâs a clue.
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Warburg and ADIA didnât buy IDFCâs shares. They bought a special type of preference shares which will eventually convert to regular shares. These are the kind of shares that VC investors in startups usually like. I mean, they do invest a lot on vibes and need a bunch of conditions and safeguards to go with their investment. Stuff like âyou canât just sell your company and exit, and if you do then you have to give us at least 3X our money backâ. Investors in listed companies can just read the companyâs financials. More regulations, less vibes.
Anyway so the two investors have preference shares which will eventually convert to regular shares. When these shares convert is conditional. Hereâs IDFCâs CEO V Vaidyanathan from the bankâs meeting with analysts last month:
The terms of the contract are that if the stock stays above Rs. 60 for a period of 45 trading days, then it automatically stands converted. So to make it clear, therefore, we donât have to really exactly wait for 18 months and all that stuff. If all goes well, within 45 days of allotment, it might just stand converted. And in the interim, they will get an 8% return.
If IDFCâs average share price remains above âš60 for 45 days, Warburg and ADIAâs preference shares convert to regular shares right away. If it doesnât, the two get an additional 18 months to convert their shares and the bank will have to pay them an interest at 8% pa until they do. [2] Thatâs an additional âš900 crore ($105m) over 18 months, a lot of money!
Now, from a companyâs valuation perspective, dividends donât make a lot of difference. A company is, for the most part, valued based on its earnings. Dividends are issued post-earnings, they donât affect the companyâs profit figure. So they donât make a company inherently more or less valuable. In general though shareholders like dividends. If you do nothing and money hits your bank account, thereâs a nice, warm, fuzzy feeling to it. Shareholders seem to give this feeling some value, [3] and itâs basically a thing that a dividend can cause a temporary bump in the companyâs stock price. Especially if itâs come after a 7-year gap.
A temporary bump is exactly what IDFC needed. And thatâs what they got. Itâs been more than 30 days now and its stock price has been safely above âš60. Of course, it was also affected by the fact that two prominent investors were taking a large stake in the bank. But an additional push never hurt. After all, spending âš183 crore to save âš900 crore seems like a great deal.
Footnotes
[1] Technically, this money comes from its profits and not from the money itâs raised. But yeah, we know.
[2] I find it funny that this interest is actually referred to as a dividend just because it comes from preference âsharesâ. In this particular situation, itâs definitely an interest.
[3] I was, of course, being a little facetious. There are legitimate reasons for why shareholders might like a dividend. Earnings for retirees and pension funds, which have to give out money every year, etc., need dividends to survive. But then again, these are not the folks who wouldâve invested in a bank that hasnât paid out a dividend in the last 7 years.
Original Source: Why Is IDFC First Bank Raising âš7,500 Cr and Handing Out Dividends?