(Reuters) – India’s IDFC FIRST Bank will raise up to 75 billion rupees ($877 million) from affiliate firms of private equity group Warburg Pincus and the Abu Dhabi Investment Authority (ADIA) sovereign wealth fund, the lender said on Thursday.
IDFC FIRST Bank will issue Warburg Pincus and ADIA convertible shares, which, if fully converted, will give them a combined 15% stake in the bank.
Currant Sea Investments B.V., a Warburg Pincus affiliate, will invest 48.76 billion rupees for a 9.8% stake, while ADIA unit Platinum Invictus B 2025 RSC will invest about 26.24 billion rupees for a 5.10% stake, IDFC FIRST said.
The bank has a loan book of 2.31 trillion rupees, and growing it 20% annually “is very possible” considering IDFC FIRST is a “mid-tier bank coming off a low base,” CEO V. Vaidyanathan told Reuters.
The capital raise – which Jefferies said was larger than its estimates – will set the bank up for the next phase of growth, Vaidyanathan said.
He added that as a part of the deal, Warburg will get a seat on IDFC FIRST’s board.
The fundraise will increase the bank’s book value per share by 2.3% and its overall capital adequacy to 18.9% from 16.1%, it said in a statement.
The plan is subject to regulatory and shareholder approvals.
In the October-to-December quarter, the lender reported a 53% drop in net profit, as bad loans in its microfinance portfolio rose.
Excluding the microfinance book, asset quality remains stable, Vaidyanathan said. The bank has yet to report earnings for the March quarter.
IDFC FIRST “continues to do well on retail loans/deposits but MFI (microfinance) is a headwind,” Jefferies said.
The company’s shares erased initial losses to trade 0.5% higher in Mumbai. ($1 = 85.5180 Indian rupees)
(This story has been corrected to remove the reference of Warburg Pincus being an existing investor in IDFC First Bank in paragraph 2)
(Reporting by Hritam Mukherjee in Bengaluru and Siddhi Nayak in Mumbai, additional reporting by Ira Dugal; Editing by Mrigank Dhaniwala and Savio D’Souza)
