PrIvate sector lender IDFC First Bank is set to raise nearly Rs 2,000 crore via a preferential issue in order to create a capital war-chest in order to contain any fallout due to Covid-19, two people familiar with the matter said.
The fresh round of fundraising will be subscribed by a mix of internal and external investors. The board is set to meet on Friday to take a call on the fundraise. The bank has not appointed any investment bank so far to help with the capital raise.
The scheduled fundraising would help create capital buffers to absorb future shocks if asset quality takes a hit due to Covid-19 related pressures.
It is expected that ICICI Prudential Life Insurance and IDFC may subscribe to a majority of the Rs 2,000-crore preferential issue being planned by IDFC First Bank.
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.
The lender has a common equity tier 1 or CET1 ratio of 13.28% at the end of the December quarter.
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.
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