Result Update Rating matrix IDFC Ltd IDFC Bank Rating : Buy Buy Expected Price : 56 66 Target Period : 12 months 12 months Potential Upside : 40% 16% Demerger Structure effective from Oct 1 st, 2015 Stock data IDFC Bank Market Capitalisation 19304 crore GNPA (Q3FY16) 1462 crore NNPA (Q3FY16) 453 crore NIM (Q3FY16) 2.0% 52 week H/L 73.5/43.1 Net worth 13570 crore Face value 10 DII holding (%) 5.3 FII holding (%) 23.0 Stock data IDFC Ltd (consol) Market Capitalisation 6431 crore Bank GNPA (Q3FY16) 1462 crore AMC AUM (Q3FY16) 54440 crore Alternatives AUM (Q3FY16) 16379 crore 52 week H/L 87.6/38.4 Net worth 9997 crore Face value 10 DII holding (%) 14.0 FII holding (%) 47.0 Research Analyst Kajal Gandhi kajal.gandhi@icicisecurities.com Vishal Narnolia vishal.narnolia@icicisecurities.com Vasant Lohiya vasant.lohiya@icicisecurities.com First quarterly results post demerger... February 2, 2016 IDFC Bank/IDFC Ltd 56/ 41 IDFC Bank reported a PAT of 242.2 crore, higher than our estimate of 193 crore, primarily led by higher non-interest income at 217.9 crore vs. our estimate of 162.2 crore. IDFC Bank is reporting its performance for the first quarter, post de-merger; figures are not comparable on a YoY and QoQ basis On the asset quality side, the bank reported GNPA at 1462 crore, with GNPA ratio of 3.09%. Net NPA ratio was at 0.98% in Q3FY16, with absolute NNPA at 453.4 crore. Total stress as per management stays at 8800 crore though it is ~ 5500 crore on regulatory basis NII was at 386.3 crore, in line with our estimate of 382.4 crore in the quarter. Gross loan book was at 47359 crore as of Dec 15 Non interest income was up at 218 crore YoY, owing to better treasury gains at 171 crore as the bank has maintained large and excess SLR investment book in G-sec IDFC Ltd The consolidated entity reported a PAT of 176 crore for Q3FY16 better than expected 145 crore, led by strong bank profit Exhibit 1: Entity wise operating results (Q3FY16) IDFC IDFC IDF AMC Alternatives Securities Others/ Consol Operating Income 12 604 13 81 37 16 6 769 Operating Exp 6 215 1 33 20 11 14 300 Provisions 0 12 1 0 0 0-7 6 PBT 6 377 11 48 17 5-2 462 PAT before Minority & Asso. co. 4 242 11 32 14 3 2 309 Minority Interest / Consol Adj. - -114 - -5 - - -14-133 PAT 176 Weak environment impacting performance The bank reported RoE of 7.2%, RoA of 1.2% and NIM of 2% for quarter ended December 2015. Total stress as per management was at 8800 crore (though on regulatory basis it is ~ 5500 crore) has flown to the bank with provisions. GNPA, NNPA ratios were at 3.1%, 1%, respectively. With forward return ratios of the bank expected around 6.7% for RoE and 1.1% for RoA by FY18E, the bank is assigned multiple of 1.5x BV. Hence, we assign a target price of 66/share (revised from 84 earlier) for IDFC Bank. As the holding company will own all other businesses including 53% stake in the bank, we value the company providing 40% discount to respective subsidiary valuations. Accordingly, we assign a value of 56/share ( 87 earlier) for IDFC Holding Company. Exhibit 2: SOTP - Shareholder receives one share of both IDFC Bank, IDFC Holding Valn crore Stake Holding Target per Basis (FY17E) Val per share Held (%) co. share ( ) IDFC Bank standalone target 1.5x FY17E BV 22172 65.6 66 Valn of IDFC Holding Co. IDFC Holding Co Net worth 1x of NW 2000 12.6 100 - IDFC Alternatives 9% of AUM 1555 9.8 100 40 6 IDFC AMC 4% of AUM 1662 10.5 75 40 5 IDFC Securities 10x PAT 250 1.6 100 40 1 IDFC Bank (Holding co.share) 22172 139.4 53 40 44 56 ICICI Securities Ltd Retail Equity Research
Variance analysis IDFC Bank Crore Q3FY16 Q3FY16E Q3FY15 YoY (%) Q2FY16 QoQ (%) Comments NII 386.3 382.4 NA NA NA NA NIM (%) 2.0 2.0 NA NA NA NA Other Income 217.9 162.2 NA NA NA NA Higher non-interest income led by traction in treasury income Net Total Income 604.2 544.6 NA NA NA NA Opex 215.3 195.6 NA NA NA NA PPP 388.9 349.0 NA NA NA NA Provision 12.3 10.2 NA NA NA NA PBT 376.6 338.8 NA NA NA NA Tax Outgo 134.5 145.8 NA NA NA NA PAT 242.2 193.0 NA NA NA NA PAT came in higher than estimate led by non-interest income Key Metrics GNPA 1,462.3 NA NA NA NA GNPA ratio came in at 3.1%, while net NPA stood at 1% of advances NNPA 453.4 NA NA NA NA Total Restructured a 1,989.5 NA NA NA NA Net restructured book formed 4.3% of book Variance analysis IDFC Ltd (consolidated) Crore Q3FY16 Q3FY16E Q3FY15 YoY (%) Q2FY16 QoQ (%) Comments Operating Income 769.0 695.6 NA NA NA NA Higher-than-expected operating income led by traction in bank Operating Exp 300.0 343.5 NA NA NA NA Provisions 6.0 15.2 NA NA NA NA PBT 462.0 336.9 NA NA NA NA PBT ahead of estimates primarilly due to higher income PAT before Minority 308.7 235.8 NA NA NA NA Minority Interest / Co 133.0 90.7 NA NA NA NA PAT 175.7 145.1 NA NA NA NA Key Metrics IDFC AMC 54,440.0 NA NA NA NA IDFC Alternatives 16,379.0 NA NA NA NA IDF book 735.0 NA NA NA NA Balance sheet size 89,259.0 NA NA NA NA ICICI Securities Ltd Retail Equity Research Page 2
Company Analysis Transformation into bank Post de-merger IDFC has been structured as a three tier company with IDFC Ltd, the parent and listed entity, remaining at the top of the structure with a non-operating holding financial company (NOHFC) at the second level below the parent. This NOHFC has four subsidiaries engaged in banking (IDFC Bank) and allied business including investment banking, asset management and alternate class business. Existing shareholders received one share of IDFC Ltd and one share of IDFC Bank for every share of IDFC before demerger. There are two listed entities IDFC Ltd and IDFC Bank. Exhibit 3: Post demerger holding structure IDFC Ltd (FII - 48%) 100% 47% - Held by current shareholders of IDFC ltd directly 53% IDFC FHCL (Revenues ( 1719 crore (NOFHC) 75% 100% 100% 100% IDFC Bank (FII-22.4%) IDFC AMC IDFC Alternative IDFC NBFC-IDF Other subsidiaries Under the new structure, IDFC Bank is starting with balance sheet size of 73447 crore. An infrastructure development fund (IDF) has been created with 440 crore of networth, 735 crore loan book and can see huge growth potential. IDFC has been given exemption from regulatory requirements including SLR, CRR and PSL to the extent of 30% of eligible infra loans, subject to verification and certification. RBI notification for infrastructure boost via issuance of long term infra bonds (>seven years) for banks allowing them to claim exemption from CRR, SLR and PSL will be based on eligible credit calculations. We believe the exemption will gradually rise and reach ~50% in four or five years. This is expected to enable the bank to reach close to double digit RoE (8.4% in FY20E) in four years. RoA is expected to stay at ~1.1% in first two years till FY18E and reach ~1.4% in FY20E. Investment book for bank is 33821 crore and 10688 crore is core SLR. Meeting priority sector (PSL) norms is one of the challenges for IDFC as its loan book consists of infra loans. New PSL guidelines, however, have provided further respite for IDFC as it requires new banks to meet 40% lending target to agriculture, education & weaker section by March 2017. We expect the loan book to grow at 16% CAGR to 81084 crore by FY20E. With focus on meeting PSL norms, advances classified under PSL category will need to grow as till that time, the low yielding RIDF bonds or purchase of assets will lead to a drag on NIM. NII is expected to grow at 15% to 2554 crore by FY20E. NIM is expected to reach 2.4% by FY20E. ICICI Securities Ltd Retail Equity Research Page 3
Shareholding pattern to offer room for increased FII participation The new bank has double the equity shares of current IDFC holding company as IDFC shareholders will hold 47% in the bank directly. Parent IDFC will have 53% in the bank through wholly-owned subsidiary; shareholder of the parent holding company, indirectly will own 53% taking the pie to 100%. IDFC Bank will offer room for FII holding to go up to 49% in the bank on day 1, which can further rise to 74% after five years. The government holding will decline to around 7.7% in the bank. IDFC Holding will have to bring down its 53% stake in bank to 40% by 2019 as per RBI guidelines on promoter holding. Exhibit 4: Shareholding pattern of IDFC as on December 2015 Diversified ownership hopefully provided comfort to RBI. The government is the largest shareholder. Its involvement in regular business activity is not there Fis/Insu. Co/Banks, 7% Corporate Bodies, 5% Retail, 17% MF, 7% FII/FDI/NRI, 47% GOI, 17% Foreign ownership of the bank will be under 25% as post the parent becoming domestic, the bank will also be classified domestic. Strong professional management IDFC Bank Rajiv Lall is the current Executive Chairman while Vikram Limaye is MD and CEO. Rajiv Lall will be the banking CEO. Pawan Bansal from E&Y (Citi and ANZ) will be Chief Risk Officer. IDFC shareholders received one share in IDFC Bank, IDFC Holding 1. All financially regulated businesses owned by NoFHC namely IDFC Financial Holding Company. NoFHC will hold 53% in bank 2. The demerger became effective on October 1, 2015 and both the bank and IDFC holding company are already listed and trading on exchanges IDFC Bank has 24 branches. Of these, 15 are rural branches in Hoshangabad, Khandwa and Harda districts of Madhya Pradesh. Eight urban branches are in Pune, Ahmedabad, Hyderabad and Bengaluru. ICICI Securities Ltd Retail Equity Research Page 4
IDFC Bank Loan growth expected at 16% CAGR Erstwhile IDFC was engaged in financing infrastructure projects in sectors like energy, telecommunication, transportation, commercial and industrial projects including hospitals, education, tourism and hotels. IDFC s total exposure was 46889 crore in Q2FY16, of which energy was highest at 41%, followed by transportation 25%, telecommunication 23% and others 11%. Post transfer to bank, we expect it to have similar sector exposure with overall book at 47359 crore. Leaving Bharat Bank classified for retail and rural banking, we believe the infra portfolio may largely be same. This is expected to get gradually diversified. Overall growth is expected at 16.1% CAGR in FY17-20E to 81084 crore. Exhibit 5: Believe loan book of old IDFC as of Q2FY16, can reflect current Bank book (o/s disbursements book) 7950, 16% 21634, 44% 8133, 17% 11517, 23% Energy Transport Telecom Others Funding portfolio to move to bank as loan book moves out to bank Funds will remain wholesale even in the next three years as even with banking licence, SA generation will take longer. Branches earlier did not exist for IDFC to reach people. Three large branches and 39 AMC branches were the only presence. Hence, with no legacy of the existing model, IDFC is expected to leverage on technology and concentrate on liability building on the retail side. It has 24 branches and three ATMs. Of these, 15 are rural branches in Hoshangabad, Khandwa and Harda districts of Madhya Pradesh. The eight urban branches are in the four metros, Pune, Ahmedabad, Hyderabad and Bengaluru. Going ahead, with management focus on building its deposit franchise, we expect borrowing to grow 7.5% CAGR in FY17-20E, deposits within are expected to grow at 49.7% CAGR over the same period. ICICI Securities Ltd Retail Equity Research Page 5
Exhibit 6: Funding profile IDFC Bank CASA, 0% Term deposits, 2% Q3FY16 others Infra bond, 15% Bonds 69% Short Term, 19% Source: Company quarterly presentation, ICICIdirect.com Research Incremental CASA to aid NIMs With inheritance of liabilities side from erstwhile IDFC, IDFC Bank, currently is primarily a wholesale funded entity. Going ahead, we expect healthy traction in retail deposits with branch expansion and customer acquisition. Within deposits, CASA is expected to grow at a higher pace, though initial traction could be slow; thereby providing impetus to margins ahead. Currently, NIM came at 2.0% in Q3FY16, which is expected to improve to 2.4% by FY20E. IDFC spreads which were 130 bps have moderated in the bank Asset quality pain in infra portfolio to stay As per IDFC, SLR, CRR can increase costs by 75 bps for loans where it will be needed Asset quality deterioration was sharper and disappointing over last few quarters in financing portfolio. Asset quality side, the bank has reported GNPA at 1462 crore, with GNPA ratio of 3.09%. Net NPA ratio was at 0.98% in Q3FY16, with absolute NNPA at 453.4 crore. Restructured assets formed 3.7% of loans. Total stress as per management stays at 8800 crore though it is ~ 5500 crore on regulatory basis. Provision reserve has been built at ~10% of loans ( 4600 crore including one time 2500 crore). Hence, 50-60% of 8800 crore stress has been provided and taken to the bank and is not expected to rise in existing infra portfolio as per management. Exhibit 7: Asset quality to remain steady in IDFC Bank ( crore) 1800 1600 1400 1200 1000 800 600 400 200 0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 (%) Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 FY16E GNPA NNPA GNPA (%) NNPA (%) FY17E Source: Company quarterly presentation ICICIdirect.com Research Stability in return ratio past now, expect moderation in banking Historically, IDFC has maintained RoE of 13-14% and leverage of 4-6x. With the banking licence, higher leverage moving from 5-6x to >15x will help generate better return ratios over the long term. We expect RoE and RoA of 8.4% and 1.4%, respectively, in FY20E. ICICI Securities Ltd Retail Equity Research Page 6
IDFC Ltd (consolidated) Post de-merger, IDFC Ltd, being parent company holds business divided in four subsidiaries engaged in banking (IDFC Bank) and allied business including investment banking, asset management and alternate class business. Among businesses, IDFC Bank is the major contributor to the financial performance to the extent of nearly 80% of operating income. Non-bank entities includes IDFC AMC (75% stake) engaged in asset management business with its AAUM at 54440 crore as of December 2015. IDFC Alternatives (100% stake) is a multi-asset class investment management vertical with 16379 crore of AUM invested within three distinct asset classes - private equity, infrastructure equity and real estate. IDFC Securities and IDF are other fully owned subsidiaries engaged in investment banking and infrastructure debt management business respectively. Exhibit 8: IDFC AMC & Alternatives major other income contributor (Q3FY16) ( crore) IDFC IDFC IDF AMC Alternatives Securities Others/ Consol Operating Income 12 604 13 81 37 16 6 769 Operating Exp 6 215 1 33 20 11 14 300 Provisions 0 12 1 0 0 0-7 6 PBT 6 377 11 48 17 5-2 462 PAT before Minority & Asso. co. 4 242 11 32 14 3 2 309 Minority Interest / Consol Adj. - -114 - -5 - - -14-133 PAT 176 Non-interest income led by asset management to remain strong IDFC, post de-merger, comprises four business units including AMC segment, own investments and securities business, which provide a basket of fee-based income. Non-interest income (except bank) forms nearly 21.5% of consolidated total income. After IDFC Bank, we expect AMC and alternatives subsidiaries to remain major contributors to overall income for the consolidated entity. Average assets under management (AUM) in the non-mf business (Alternatives) in Q3FY16 were at 16379 crore constituting: (i) 5605 crore in private equity, and (ii) 9337 crore in project equity. For IDFC, the business earned 37 crore as operating income. We expect fee-based income to be strong even post conversion as the bank as the same focus, as previously, is expected to continue. Exhibit 9: IDFC Alternatives AUM as on Q3FY16 ( crore) Average AUM (Alternatives) 16379 Private Equity 5605 Project Equity 9337 Real Estate 1437 Average AUM (MF) 54440 Equity AUM (%) 26 For the acquired MF business from Standard Chartered (SC), AUM in Q3FY16 was at 54440 crore, representing 4.1% market share. Debtequity in AUM was at 74% and 26%, respectively. After the bank, IDFC AMC is the second largest contributor in topline with IDFC AMC earning asset management fees of 81 crore in Q3FY16. ICICI Securities Ltd Retail Equity Research Page 7
Outlook and valuation IDFC Bank and IDFC Holding The networth, loan book and balance sheet of IDFC Bank were 13322 crore, 46285 crore and 73447 crore, respectively as on October 1, 2015. It reported RoE of 7.2% and RoA of 1.2% and NIM of 2% for quarter ended December 2016. Total stress as per management was at 8800 crore (though regulatory basis it is ~ 5500 crore) has flown to the bank with provisions. GNPA and NNPA ratio were at 3.1% and 1%, respectively. With forward return ratios of the bank expected around 8.4% for RoE and 1.4% for RoA by FY20E, the bank is expected to trade at multiple of 1.5x BV. Hence, we assign a target price of 66 (revised from 84 earlier) for IDFC Bank. As the holding company will own all other businesses including 53% stake in the bank, we value the company providing a 40% discount to respective subsidiary valuations. Accordingly, we assign a value of 56 per share (from 87 earlier) for the IDFC Holding Company. Exhibit 10: SOTP - Shareholder to have one share of both IDFC Bank and IDFC Holding Valn crore Stake Holding Target per Basis (FY17E) Val per share Held (%) co. share ( ) IDFC Bank standalone target 1.5x FY17E BV 22172 65.6 66 Valn of IDFC Holding Co. IDFC Holding Co Net worth 1x of NW 2000 12.6 100 - IDFC Alternatives 9% of AUM 1555 9.8 100 40 6 IDFC AMC 4% of AUM 1662 10.5 75 40 5 IDFC Securities 10x PAT 250 1.6 100 40 1 IDFC Bank (Holding co.share) 22172 139.4 53 40 44 56 ICICI Securities Ltd Retail Equity Research Page 8
Company snapshot (Erstwhile IDFC Ltd) 120 100 80 60 40 20 0 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Source: Bloomberg, Company, ICICIdirect.com Research Key events Erstwhile IDFC Date Event FY97 Infrastructure Development Finance Company Ltd was incorporated in1997 as a public limited company with their registered office at Chennai FY06 Listed on exchanges FY07 Increased its stake in National Stock Exchange of India Ltd to 8.2% by acquiring an additional 6% stake FY07 Acquired 33.33% stake in SSKI Securities Pvt Ltd (SSKI), which is a domestic mid-size investment bank and an institutional brokerage and research platform May-08 IDFC entered into asset management (MF) by acquiring the AMC business of Standard Chartered Bank in India FY08 Infrastructure boom pushed loan growth to 43% YoY and profits surged 47% YoY, taking stock price to peak FY09 Consolidated growth but remained largest infrastructure finance company for India FY12 Applied for banking licence with RBI Jul-13 Reported large increase in GNPA for first time Mar-14 Received banking licence, saw surge in prices Top 10 Shareholders IDFC Bank Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 IDFC Promoters 31-Dec-15 53.0 NA NA 2 GoI 31-Dec-15 7.7 NA NA 3 Sipadan Investments (Mauritius) 31-Dec-15 4.5 NA NA 4 The Royal Bank Of Scotland 31-Dec-15 3.2 NA NA 5 CLSA Global Markets Pte. Ltd. 31-Dec-15 1.4 NA NA 6 Orbis Sicav - Asia Ex-Japan Equity Fund 31-Dec-15 1.2 NA NA 7 Actis Hawk Limited 31-Dec-15 1.1 NA NA 8 HSBC Global Investment Funds 31-Dec-15 1.0 NA NA 9 LIC 31-Dec-15 0.9 NA NA 10 First State Investments 31-Dec-15 0.8 NA NA Top 10 Shareholders IDFC Ltd Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Government of India 31-Dec-15 16.4 NA NA 2 Sipadan Investments (Mauritius) Ltd. 31-Dec-15 9.5 NA NA 3 The Royal Bank of Scotland 31-Dec-15 7.7 NA NA 4 First State Investments 31-Dec-15 2.9 NA NA 5 Actis Hawk Limited 31-Dec-15 2.3 NA NA 6 Orbis Sicav - Asia Ex-Japan Equity Fund 31-Dec-15 2.2 NA NA 7 UTI MF 31-Dec-15 1.9 NA NA 8 Life Insurance Corporation Of India 31-Dec-15 1.8 NA NA 9 CLSA Global Markets Pte. Ltd. 31-Dec-15 1.7 NA NA 10 J.P. Morgan Asset Management 31-Dec-15 1.4 NA NA Shareholding Pattern IDFC Bank (in %) Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Promoter - - - - 53.0 FII - - - - 23.0 DII - - - - 5.3 Others - - - - 18.7 Shareholding Pattern IDFC Ltd (in %) Sep-14 Dec-14 Jun-15 Sep-15 Dec-15 Promoter - - - - - FII 47.7 47.4 47.4 47.0 47.0 DII 31.1 30.0 29.8 14.0 14.0 Others 21.2 22.6 22.8 39.0 39.0 ICICI Securities Ltd Retail Equity Research Page 9
Financial Summary - IDFC Bank Profit and loss statement - IDFC Bank crore (Year-end March) Q3FY16 2HFY16E FY17E FY18E FY19E FY20E Interest Earned 1789.1 3729.0 8150.4 8616.9 9299.9 10392.5 Interest Expended 1402.8 2946.0 6470.5 6752.3 7143.0 7838.1 Net Interest Income 386.3 783.1 1679.9 1864.5 2156.9 2554.4 % growth 11.0 15.7 18.4 Non Interest Income 217.9 430.1 820.7 922.8 1040.6 1182.6 Net Income 604.2 1213.2 2500.6 2787.4 3197.5 3737.0 Staff cost 120.5 252.0 554.4 637.6 720.4 792.5 Other opex 94.9 180.0 396.0 435.6 483.5 531.9 Operating Profit 388.9 781.2 1550.2 1714.2 1993.5 2412.7 Provisions 12.3 29.7 202.1 235.4 271.2 311.9 PBT 376.6 751.5 1348.0 1478.8 1722.3 2100.8 Taxes 134.5 263.0 377.5 414.1 465.0 525.2 Net Profit 242.1 488.5 970.6 1064.7 1257.3 1575.6 % growth 9.7 18.1 25.3 EPS ( ) 0.7 1.4 2.9 3.1 3.7 4.7 Balance sheet IDFC Bank crore (Year-end March) Q3FY16 2HFY16E FY17E FY18E FY19E FY20E Sources of Funds Capital 3392.6 3385.1 3385.1 3385.1 3385.1 3385.1 Reserves and Surplus 10177.4 10425.4 11395.9 12460.7 13717.9 15293.5 Networth 13570.0 13810.5 14781.1 15845.8 17103.1 18678.6 Borrowings 66250.0 68632.9 73058.2 77245.0 83627.2 90748.6 Other Liabilities 4036.0 4405.0 5065.8 5572.3 6129.6 6742.5 Total 85,502.0 86,848.3 92,905.0 98,663.0 106,859.8 116,169.7 Application of Funds Cash and equivalent 1943.0 2428.2 2508.0 2550.7 2646.8 2674.6 Investments 33821.0 33527.0 36607.6 35477.5 34364.4 36097.8 SLR 10688.0 10800.0 10800.0 14210.2 14226.3 14376.1 RIDF 0.0 0.0 11978.1 11048.0 10831.2 11509.6 Other Investments 23133.0 22727.0 11363.5 5681.8 2840.9 2840.9 Advances 42995.0 44037.0 51787.5 61257.2 71126.4 81084.2 PSL 0.0 0.0 2466.1 4537.6 6466.0 7371.3 Other Assets incl FA 6742.0 6856.1 4467.9 3915.1 5188.2 3684.4 Total 85502.0 86848.3 92905.0 98663.0 106859.8 116169.7 ICICI Securities Ltd Retail Equity Research Page 10
Key ratios IDFC Bank 2HFY16E FY17E FY18E FY19E FY20E Valuation No. of Equity Shares 339.3 338.5 338.5 338.5 338.5 338.5 EPS ( ) 0.7 1.4 2.9 3.1 3.7 4.7 BVPS ( ) 40.0 40.8 43.7 46.8 50.5 55.2 Yields & Margins (%) Yield on assets 9.6 10.0 9.7 9.7 10.0 Avg. cost on funds 8.6 9.1 9.0 8.9 9.0 Net Interest Margins 2.0 2.0 2.1 2.1 2.3 2.4 Quality and Efficiency Cost to income ratio 35.6 35.6 38.0 38.5 37.7 35.4 Leverage ratio 0.2 0.2 0.2 0.2 0.2 0.2 RONW (%) 7.2 7.1 6.6 6.7 7.4 8.4 ROA (%) 1.2 1.1 1.0 1.1 1.2 1.4 ICICI Securities Ltd Retail Equity Research Page 11
ICICIdirect.com coverage universe (Banking) CMP M Cap EPS ( ) P/E (x) P/ABV (x) RoA (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E Bank of India (BANIND) 98 116 Sell 7,747 26-3 16 3.8 NA 6.0 0.4 0.7 0.6 0.3 0.0 0.2 6-1 4 Bank of Baroda (BANBAR) 122 172 Hold 28,215 15 16 20 8.0 7.8 6.2 0.9 1.0 0.8 0.5 0.5 0.5 9 9 10 Punjab National Bank (PUNBAN) 90 130 Hold 16,302 17 18 25 5.5 5.1 3.6 0.8 0.7 0.6 0.5 0.5 0.7 8 8 11 State Bank of India (STABAN) 173 300 Buy 128,971 18 19 22 9.9 9.2 8.0 1.3 1.1 1.0 0.7 0.7 0.7 11 10 11 Indian Bank (INDIBA) 92 184 Buy 3,939 21 23 29 4.4 4.0 3.2 0.4 0.4 0.4 0.5 0.5 0.6 7 7 9 Axis Bank (AXIBAN) 399 440 Hold 94,824 31 35 39 12.9 11.4 10.2 2.2 1.9 1.7 1.7 1.7 1.6 18 17 16 City Union Bank (CITUNI) 83 105 Buy 4,953 6 7 8 12.9 11.7 10.2 2.0 1.8 1.6 1.4 1.4 1.5 16 15 15 DCB Bank (DCB) 79 72 Hold 2,054 7 6 7 11.7 12.5 11.3 1.6 1.4 1.3 1.3 1.0 1.0 15 11 11 Federal Bank (FEDBAN) 47 45 Sell 8,066 6 4 5 8.0 11.7 9.6 1.1 1.1 1.0 1.3 0.8 0.8 14 9 10 HDFC Bank (HDFBAN) 1,060 1,170 Buy 264,938 41 49 60 26.0 21.5 17.6 4.4 3.7 3.2 1.9 1.9 1.9 19 18 19 IndusInd Bank (INDBA) 925 1,000 Hold 53,879 34 39 50 27.3 23.6 18.6 4.7 3.1 2.8 1.8 1.9 2.0 18 16 16 Jammu & Kashmir Bk(JAMKAS) 71 95 Hold 3,454 10 17 21 6.8 4.1 3.4 0.7 0.7 0.6 0.7 1.0 1.1 9 13 14 Kotak Mahindra Bank (KOTMAH) 688 677 Hold 125,811 14 12 14 50.4 58.9 48.3 6.0 5.5 5.0 1.5 1.1 1.2 12 9 10 Yes Bank (YESBAN) 772 750 Hold 32,378 48 60 69 16.1 12.9 11.1 2.8 2.4 2.0 1.6 1.7 1.6 21 20 19 IDFC Bank (IDFBAN) 57 66 Buy 19,304 1 3 19.7 19.8 1.4 1.3 1.1 1.0 7 7 ICICI Securities Ltd Retail Equity Research Page 12
RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 13
RATING RATIONALE ANALYST CERTIFICATION ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them or view(s) in this report. as Terms Strong & conditions Buy, Buy, and Hold other and disclosures: Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. We /I, Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. 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ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. ( associates ), the details in respect of which are Strong available Buy: www.icicibank.com. >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: and their relatives Up to from +/-10%; maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Sell: -10% or more; ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. 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