I am not a financial analyst, but as far as I have been observing the bank from last 5 years, I feel that the bank has crossed many big hurdles - legacy loan, initially operating expenses, then MFI problem… We people have been seeing the same problem from last 5-6 years, for this also we have become very hopeless…Mr. Raju Ji, I want to look at the bank from the market cap point of view rather than from the equity dilution point of view.. Today, IDFC FIRST BANK has earned interest at Kotak level in FY21. I am not saying that IDFC FIRST BANK should get the valuation of Kotak Bank, but in future when IDFC FIRST BANK will become equal to Kotak Bank on many parameters like cost to income, interest expense ratio and credit cost, then this bank will show better profitability than Kotak…
Q4FY25 PPoP is 7069 a generous growth of 25% be assumed, then in two years we land at 11045, still far from the number in the Excel sheet.
As far as my expectations go, I believe Banks are not going to do too well for next few quarters.
Last quarter we saw
Sharp increase in Provisioning QoQ, signals distress.
Icici 104% 
Hdfc 352% (YoY 450%)
Axis 190%
Idfcfirst may fare a little better cuz it addressed the pain early.
I believe, Next year this time we should see this stock run a few strides.
I agree with your point Mr Amit Ji… According to me, We should not predict PPOP for next 2 years taking FY25 as base because FY25 is MFI effected year… If we take FY24 and FY23 then growth will be 31% and 67% year on year when cost to income were increasing. In FY25 also there was 17% growth in PPOP… According to me we will be close to Excel sheet in FY27
the rate cut by the bank in term deposit will be very beneficial on interest expense…. I think cost to income also will come down much sooner because the result was clear, Q1 FY26 interest income was almost flat due to RBI rate cut and some MFI effect… but PPOP increased by 23-24%(QoQ)…. yes trading gain was included in it but due to reduction in operating expenses, there will be a big jump in PPOP when interest income will increase at normal rate…
I think cost to income can come around 65 by FY27, 55% by FY 29 and below 45% by FY 32… then bank profit will be significantly higher because it will keep NIM at 6++… if it is able to do 20% loan growth with less NPA then it will also achieve market cap of up to 5-6 lakh crore by FY32
I’ve been a long-term investor in this stock, and I’ve observed how VV has earned an almost god-like stature among retail investors—this thread is a clear reflection of that sentiment.
In the initial years post-merger, the blame was consistently placed on legacy infrastructure and the inherited book for the bank’s underperformance, which was understandable to an extent. However, the narrative that the new book being built was of “pristine quality” hasn’t entirely held up, especially in light of the recent MFI-related issues.
Moreover, despite several rounds of equity dilution, the bank’s PAT has stagnated. I’m attaching a screenshot from the Q4FY22 investor presentation—anyone going by those projections would have conservatively expected a quarterly PAT of ₹1000–1500 crore by now.
So, for anyone building forward-looking models or thesis, pls take m
anagement’s commentary with a fair bit of caution.
MFI was a sector related problem and not a bank related problem. Provisions of almost all the banks have increased… MFI is a short term problem, if not today then it will be solved in 1-2 quarters… RBI also has a circular responsible for MFI problems… and IDFC FIRST BANK’s profit was increasing even before the MFI problem… yes profit went down due to MFI but profit will definitely go up from here
In their defence, I’d like to say that, their loan book growth is intact, around 19%.
Earlier, the new branches and credit card business were using money, that is a massive uphill task. But, that is now under control. This quarter the Core PpOp is up 7.8%, it’s huge! Then came MFI.
I believe, by 2026, we will see an year of hassle free business, which will skyrocket the PAT in proportion with its Loan Book. That would be a good time for the naysayers to exit. I will be waiting at that nook, waving them good buy.
Key Points to Keep in Mind When Investing in the Banking Sector
Banking is Cyclical:
The banking industry has always moved in cycles, and this will continue in the future. Investors should be prepared for these fluctuations and use downturns as opportunities to buy quality names at attractive valuations.
Limited Differentiation:
Unlike technology, banking tends to have narrower valuation gaps. While stronger banks with superior liability franchises, digital platforms, and risk management do command sustained premiums, RBI regulation ensures that competition remains healthy and prevents outsize divergences across the sector.
Mature vs. New Banks:
Established banks such as ICICI, HDFC, Kotak, and Axis are mature players with lower operating costs. In contrast, newer banks like IDFC, Bandhan, AU, CSB, Ujjivan, and Jana are still building capacity and technology platforms, which keeps their cost structures higher. Profitability comparisons between the two groups are therefore not meaningful.
Patience is Critical:
Investing in new-age banks requires significant patience. As long as these banks continue to gain market share, they have the potential to outperform the sector over the long term.
Focus on Profitable Loan Categories:
Across cycles, gold loans and retail secured lending to salaried class have consistently proven to be the most profitable segments. Banks with a greater focus on these loan categories tend to deliver stronger and more stable performance. This along with liability (CASA) strength are the real drivers of long-term performance.
This article flags the frequent equity dilution which has adversely affected the shareholders.
IDFC First Bank’s frequent equity dilution is becoming a pain for its shareholders
Yes, equity dilution is a big problem for the bank but I feel that it will slow down with profitability in future… If share price goes up with profitability then there will be 2 benefits, one benefit will be that the book value will increase and along with good profit, market will also give good valuation and secondly, due to increase in profit, capital adequacy will also be maintained… because till now the bank has not been able to show profit as per its income and for growth it had to take the help of equity dilution
Any views on IDFC Q1 FY26 presentation? Why first 4 slides on post merger progress after 2018 and why last 6 slides are on capital first achievement before 2018 ? Why stock price appreciation of Capital First is shown on dedicated slide? How to analyze this?
Really Nice insights.
In a theoretical scenerio where banks don’t need to raise money, they can over provision to show less profits, so less taxes to govt and that money can keep compounding for the bank leading to better (real) long term growth!!
And if this is effectively conveyed to public, it might just get 3 pbv and fund raising isn’t hard either. (The real book value (with standard provisions) can be a little higher then quoted book value but definitely not 3x!!)
This can also provide them with leverage in bad times, where the earlier over provisioning will help them keep the bank profitable when other banks are doing much worse and it will look like it’s doing better then it’s peers.
Sma 1 + sma 2 for mfi reduced to 220 cr this quarter, so upcoming gross npa due to mfi will be max 250 cr sep quarter wrt 512 cr in June quarter…plus q1 wa seasonally weak quarter so in q2 credit cost will be low on remaining portfolio in general…
Plus last quarter 115 cr was due to atm provider company…
All this gone I m expecting provisions for this quarter will be moderating to 1200 cr…
Plus nim reduction due to rate cut transmission will be taken care by fd rates reduction and fresh capital raise…
So overall my analysis say this upcoming quarter can be much better than last one…
Is it right? Paying less tax after looking at over provision can be a real strategy of the bank… or else the % of unsecured loans in the loan book of the bank is high… anyway the unsecured portion in the loans should not be high because the bank would be providing better loans than Capital First now because the COF was higher in Capital First, so they did not have any chance of providing high unsecured loans, here the bank has better chances of providing good loans
Can anyone tell me this… taking reference of Q1 FY26, what do you think, could we have made profit with normal provision… what do you all think, by when will the bank be able to reach normal provision
If someone has watched the AGM, VV mentioned 1–2 key points. One of them was that if the bank achieves a 15% ROE, then it won’t need to raise funds and will become self-sufficient. What are your views on when the ROE can reach 15%? And do you think that with a 6% NIM, the bank can also touch a 20–22% ROE in the future?
Hi Ravi, the question is when will bank achieve the 15% ROE, FY29? nobody is sure of the next quarter forget about FY29 or 22% ROE…its a long term game and we have to stick to our conviction of why we got into this stock in the first place. And his comparison with ICICI bank was an eye opener. And even if we touch 15 % ROE, and we are growing loan book at 20%, we will still need to raise capital, unless our profits are exceptional. But then i don’t think any private bank can achieve such ROE, max is 18% from what i have seen.Only NBFCs touch 22%. So investing in NBFC is also a good choice. There are lot of undervalued ones out there in the market now.
Raju ji, I am not talking about the next 1–2 quarters, I am talking about the next 2–3 financial years. We should check the financials of ICICI Bank, HDFC Bank, and Kotak Bank.
When these large banks were generating interest income of around ₹35,000–40,000 crore, they were making profits of ₹10,000–11,000 crore, with net interest margins in the range of 4–5%. In comparison, IDFC FIRST Bank’s NIM is in the range of 6–6.5%.
If ICICI Bank can achieve 17–18% ROE with just a 3–4% NIM, then why can’t IDFC FIRST Bank reach 20% ROE? IDFC FIRST Bank had already touched 12.5% ROE by March Q4FY23. If the MFI issue had not come up, it could possibly have crossed 15% by now.
If the MFI issue gets resolved in the next two quarters, I believe FY27 will turn out to be the best year for IDFC FIRST Bank. In fact, FY27 will only be the beginning, and FY28–29 could be even better.
What do the other members think? Please share your views
IDFC bank keeps referring to ICICI Bank as their ideal However if one looks closely then we will discover that they have tried to clone themselves on HDFC Bank in every way. They adopted the same laser like customer focus in everything they do. IDFC had to work harder as HDFC bank was already present in the market, whereas when HDFC bank started they had only PSBs to compete with.
IDFC bank has tried to build the same level of credibility and trust with their ethics first approach. And unwavering adherence to RBI regulations.
IDFC bank has very little resemblance with ICICI Bank in their work culture.
HDFC bank had the initial advantage of HDFC brand which was already highly regarded, very good relations with RBI top officers and also Finance minister Manmohan Singh who later became PM.
They also had the personality cult of Deepak Parekh and Aditya Puri. V Vaidyanathan has also acquired similar aura.
HDFC bank started on a clean slate whereas IDFC bank has still some legacy Infrastructure NPAs of 3000 odd crores on its books even after back breaking write offs of last 5 years.
The good part is that there have been no red flags so far and performance so far provides a strong likelihood of a turnaround in the shape of steady and sustained results every quarter.
The microfinance problem seems to be a structural issue as it has affected all banks. The increase in threshold taxable personal income to 12 lakhs and now steep reduction in GST resulting in much greater demand/activity in the economy from october onwards should add to the liquidity in the hands of lower income groups thus improving their pay back capability.
You are right. But at the time when HDFC Bank started, India’s credit-to-GDP ratio was very low, and it kept increasing year by year. Even today, India is only at around 57%. If we compare with other countries — the USA is at 200%, China at 225%, and Japan at 234%. By 2030, it is possible that India’s credit-to-GDP could reach 100%.
That’s why the opportunity is huge today — both from natural economic growth and from the increase in the credit-to-GDP ratio. And if India has to reach a $10 trillion economy by 2035, we will need 4–5 banks of the scale of today’s HDFC Bank. I am not including IDFC FIRST Bank among those, but even if IDFC FIRST Bank becomes a bank with ₹7–8 lakh crore in size, that would still mean 16 times growth in 10 years — not a bad investment at all.