IDFC First Bank Limited: Comprehensive Stock Analysis Report | Scrolls
- Editor
- Sep 25
- 2 min read
by KarNivesh | 25 September, 2025
Overview of IDFC First Bank Limited
IDFC First Bank represents one of the most remarkable transformation stories in India’s private banking sector. Formed through the merger of IDFC Bank and Capital First in December 2018, the institution shifted its focus from infrastructure financing to retail banking. Leveraging Capital First’s strong retail lending capabilities and IDFC’s banking platform, the bank today serves over 35 million customers with a customer business of about ₹5,10,032 crores ( ₹5,09,99,000 crores or ₹5.1 lakh crore). It operates 955+ branches and 1,216 ATMs across the country. In October 2024, the bank completed a reverse merger with its parent IDFC Limited, becoming fully independent with no promoter holding.
Financial Performance
In Q2 FY25, the bank posted a total income of ₹10,684 crores, showing 21% year-on-year growth. Its Net Interest Income (NII) also grew by 21% to ₹4,788 crores. However, net profit dropped by 73% to ₹201 crores, mainly due to prudent provisioning of ₹568 crores, including stress from microfinance and a toll project account. Despite this, the bank reported an industry-leading Net Interest Margin (NIM) of 6.18% while maintaining stable funding costs.
Profitability ratios dipped, with ROE at 3.9% (down from 9.1% in FY24) and ROA at 0.43% (down from 0.99%). Asset quality remained healthy, with Gross NPA at 1.92% and Net NPA at 0.48%, supported by a strong provision coverage ratio of 75.27%. The Capital Adequacy Ratio (16.36%) and CET-1 (13.84%) highlight robust capital strength.
Valuation and Market Position
As of September 2024, IDFC First Bank’s market capitalization stood at ₹51,735 crores (₹5,29,40,000 crores). Its valuation ratios reflect high investor expectations, with a P/E of 39.76x and a P/B of 1.6x, significantly above peers like HDFC Bank and ICICI Bank. Notably, its Net Interest Margin of 6.2% remains a strong competitive edge compared to the industry average of 4–5%.
The stock has provided long-term value with a five-year CAGR of 10.5%, though it faced volatility in 2024 due to microfinance stress. From a base price of ₹42.80 in 2019, the stock touched ₹70.51 in 2024, delivering a 64.7% return.
Business Model and Strategy
The bank’s loan book is primarily retail-driven (60%), followed by corporate banking (16%), rural banking (12%), MSME (11%), and a declining legacy infrastructure exposure (1%). Over 85% of its transactions are digital, with more than 5 million app downloads and over 20 million FASTags issued. Initiatives like zero-balance accounts and personalized credit risk analytics support its customer-first positioning.
Future Outlook
IDFC First Bank targets a 20% CAGR in credit growth and 24% CAGR in deposits over FY25–27. Management aims to lift ROA to 1.2% and ROE to 10% by FY27, driven by digital expansion, rural penetration, MSME lending, and growth in credit cards. Analysts project earnings growth of over 50% annually and revenue growth of 24% per year.
Risks
Key concerns include stress in the microfinance portfolio, high-cost legacy borrowings (₹10,000 crores), elevated cost-to-income ratio, and a premium valuation that could pose downside risks. Nevertheless, proactive provisioning, tighter underwriting, and focus on underserved markets position the bank well for long-term growth.
Comments