IDFC - In-principle approval for banking license a positive - Emkay

Reco: NOT RATED
CMP: Rs 134
Target Price: Rs Not Rated

- Getting a bank license is positive for IDFC given that it will help IDFC to diversify from single product wholesale financing company to a more consumer centric bank

- IDFC had CET 1 of 22.5% as of Q3FY14 with balance sheet leverage of just 4.6x, a positive when large part of Indian banking industry is scrambling for capital

- We estimate that IDFC's RoAs post becoming a bank will come down from 290bp to 150bp post the SLR, CRR and PSL requirements and further to 120bp including higher costs

- At CMP, IDFC is quoting at 9x one-year forward rolling PER and 1.3x one-year forward rolling P/BV adjusted. At this price, the valuations are not very compelling.

Source : Equity Bulls

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