Idfc Bank Jef

India | Banks
Equity Research
IDFC First Bank April 7, 2024
Full Suite Banking Aids High Growth - Initiate INITIATING COVERAGE
with Buy RATING BUY
PRICE INR79.50^
IDFC First Bank has built a well-rounded platform, arguably among the
PRICE TARGET | % TO PT INR100 | +26%
most improved deposit franchises. Op. efficiencies will play out from
52W HIGH-LOW INR100.74 - INR53.35
2HFY25, and over FY24-27 strong deposit growth will aid loan growth that
FLOAT (%) | ADV MM (USD) 51.0% | 44.89
should aid 28% EPS Cagr even as credit costs rise. Improving ROA (to 1.5%)
MARKET CAP INR562.0B | $6.7B
and ROE (to 14%) will aid rerating. A fall in rates should help it more than
TICKER IDFCFB IN
peers. Ability to raise capital will be key. We initiate coverage with a Buy ^Prior trading day's closing price unless otherwise
rating and PT of Rs100. noted.
Full suite banking & most improved deposit franchise. IDFC First Bank has built an end-to-end CHANGE TO JEFe JEF vs CONS
banking platform that straddles a broad range of customers and products along with robust 2024 2025 2024 2025
tech platforms and competitive rates. It has strong recognition among urban clients, which REV NA NA NA NA
This report is intended for Jefferies clients only. Unauthorized distribution is prohibited.
helped it mobilise >Rs500bn in retail deposits between Mar-21 and Dec-23 (30% Cagr), & is EPS NA NA NA NA
among the fastest growing banks in the sector. On the lending side, it has ramped up presence
in retail, rural and SME segments, while diversifying corporate book outside infrastructure
loans.
We expect 28% Cagr in deposits aiding 22% in loans. IDFCFB's deposit mobilisation should Exhibit 1 - IDFC First Bank - Key metrics
stay buoyant with 28% Cagr in deposits over FY24-27 to fund growth and aid repayment of
Key metrics FY23 FY24E FY25E FY26E FY27E
Net profit (Rsmn) 24,371 29,346 34,429 49,708 69,852
EPS (Rs) 3.8 4.3 4.8 6.7 9.1
bonds of the erstwhile IDFC Limited. We expect cost pressure to ease as high-cost bonds fall ROA (%)
ROE (%)
1.1%
11%
1.1%
10%
1.1%
10%
1.3%
12%
1.5%
14%
from Rs136bn now to just Rs3bn by Mar-26. Discharge of such bonds should also help the .
P/E
P/ABV
21
2.2
19
1.8
17
1.5
12
1.4
9
1.2
bank cut deposit rates from FY27. Even as credit growth is likely to moderate from 25% (as of Source: Company Data, Jefferies
3QFY24), it will still be healthy around 22% Cagr over FY24-27, led by retail, rural & SME loans.
We see LDR moderating from 102% now to 90% by FY25 and 84% by FY27. Exhibit 2 - Strong deposit growth to sustain
Deposit Growth YoY (%) Share of deposits in total funds (%)
Levers to earning growth and profitability from 2HFY25. We expect the earnings trajectory 50%
87%
90% 93% 100%
80%
40%
to improve from 2HFY25 as opex efficiencies, absorption of FLDG costs, repayment of high- 30%
67%
72% 80%
cost liabilities & break-even of credit card platform play out. Over FY24-27, we see multiple 20% 37% 36%
60%
33%
28%
levers to earnings growth, driven by asset growth, scope for +20bps margin expansion, 10bps 10% 19%
23% 40%
rise in fee/asset ratio and +700bps fall in the cost-income ratio to 66%. We factor in a rise 0% 20%
. FY22 FY23 FY24E FY25E FY26E FY27E
in credit costs from 1.3% in FY24 to 1.8% in FY27, reflecting the rise in share of retail loans Source: Company Data, Jefferies
and normalisation of the credit cycle. These can aid 28% EPS Cagr, +30bps expansion in ROA
to 1.5% and +300bps rise in ROE to 14%. Key risks to our thesis: higher-than-expected opex Exhibit 3 - Return ratios set to improve
and credit costs. With high share of fixed-rate loans (60%), IDFCFB also benefits from a fall RoA (%) RoE (%, RHS)
2.0% 16%
in rates more than large banks. 1.6% 12%
14%
11% 10% 12%

10%
1.2%
Valuations reasonable; initiate at Buy. IDFCFB's strong earnings growth and improvement in 0.8%
1.5%
8%
1.3%
profitability should drive a rerating as valuations are reasonable at 1.5x FY25 adj PB. Its ability
1.1% 1.1% 1.1% 4%
0.4% 1%
0.1%
to raise capital will be a key enabler as CET1 CAR is relatively lower at 14%, ROE is lower and 0.0% 0%
. FY22 FY23 FY24E FY25E FY26E FY27E
loan growth is higher. We factor in two capital raises in FY25 and FY27. Initiate with Buy and Source: Company Data, Jefferies
PT of Rs100 based on 1.6x Jun-26e adj PB.
(FY Mar) 2024E 2025E 2026E 2027E
Net Profit (B) 29.3 34.4 49.7 69.9

Prakhar Sharma * | Equity Analyst
ROAA 1.10% 1.06% 1.25% 1.46%
91 22 4224 6129 | prakhar.sharma@jefferies.com
ROAE 10.2% 9.5% 11.6% 13.6%
Vinayak Agarwal * | Equity Associate
P/B 1.7x 1.4x 1.3x 1.1x +91 22 4224 6178 | vagarwal2@jefferies.com
Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 43 - 48 of this report.
* Jefferies India Private Limited
IDFC First Bank Limited (IDFCFB IN)
Equity Research
April 7, 2024
Table of Contents
Focus Charts 4
Full suite banking & most improved deposit franchise 8
Funding funnel, led by retail 8
Scale up of retail and diversification of corporate lending franchise 12
We expect 28% Cagr in deposits aiding 22% in loans 19
Multiple levers to high earning growth & improving profitability 22
Margins can improve and fee/asset can rise 22
Operating efficiencies key to healthy growth & ROA 25
Credit costs to rise from cyclical lows, but well-priced 28
Healthy earnings growth and ROA expansion 31
Valuations reasonable; initiate at Buy 35
Financials 37
Appendix 39
Senior management and employee attrition/cost trends 39
ESG 41
Please see important disclosure information on pages 43 - 48 of this report. 2

Equity Research
April 7, 2024
The Long View: IDFC First Bank

Investment Thesis / Where We Differ Risk/Reward - 12 Month View
• Robust deposit growth to sustain, resulting in higher share of lower-cost
Upside : Downside
deposits in overall funding 110
3.47 : 1
109 (+37%)
• Stronger growth in rural, retail and SME segments to support yields and 100 100 (+26%)
drive margin expansion 90
• Scale benefits to accrue over the next few years and drive lower cost-to- 80
71 (-11%)
income ratio as past investments start to bear fruits, eg: credit cards 70
• Successful track record of managing retail asset quality across cycles 60
to control credit costs 50
40
30
20
2023 2024 +12 mo.
Base Case, Upside Scenario, Downside Scenario,

INR100, +26% INR109, +37% INR71, -11%
• Loan CAGR of 22% (over FY24E-27E) • Loan CAGR of 24% (over FY24E-27E) • Loan CAGR of 20% (over FY24E-27E)
• NIMs around 6.4% (avg. FY24E-27E) • NIMs around 6.6% (avg. FY24E-27E) • NIMs around 6.2% (avg. FY24E-27E)
• GNPA 2% and NNPA 0.7% in FY25E • GNPA 1.8% and NNPA 0.5% in FY25E • GNPA 2.2% and NNPA 0.9% in FY25E
• Valuation at 1.6x Jun-26E ABV - Rs100 • Valuation at 1.8x Jun-26E ABV - Rs109 • Valuation at 1.1x Jun-26E ABV - Rs71
Sustainability Matters Catalysts

Top Material Issue(s): 1) Incorporation of ESG into credit analysis. 2) Responsible Finance. 3) • Higher system deposit growth leading to
Lending / Selling Practices. 4) Customer Privacy & Data Security. divergence in deposit and credit growth
Company Target(s): 1)The bank is targeting 20% of renewable energy in energy mix by 2025 for • Positive surprise on operating expenses,
large offices. 2) 10% of finance for green energy projects by 2027. 3) Implement water conservation driving lower cost to income ratio
initiatives for all large offices by 2025. 4) 20% reduction of waste from FY 2023 baseline 5) Cover 25% • Lower slippages leading to better asset
of value chain partners under Human Rights Assessment by 2025. 6) Maintain employee engagement quality trends and lower credit costs
at healthy levels and aim for 100% coverage. 7) Increase Training hours for employees by 10% on
average every year
Qs to Mgmt: 1) How do you plan to participate in the +US$12tn green funding gap in India? What is
the share of the company’s revenues from sectors promoting socioeconomic causes and from non-
metro & non-tier 1 locations? 2) What steps is the company taking to ensure strong data security
and customer privacy? 3) What steps is the Company taking to promote gender diversity at different
levels?

Equity Research
April 7, 2024
Focus Charts
Full suite banking & most improved deposit franchise
IDFC First Bank has built an end-to-end banking platform that straddles a broad range of customers
and products along with robust tech platforms and competitive rates. It has strong recognition among
urban clients, which has helped to mobilise >Rs500bn in retail deposits between Mar-21 and Dec-23
(30% Cagr), and is among the fastest-growing banks in the sector. On the lending side, it has ramped up
presence in retail, rural & SME segments, while diversifying the corporate book outside infrastructure
loans.
Exhibit 4 - IDFC First has significantly improved its funding profile
Funding profile (%)

Customer deposits Certificate of deposits
Money market borrowings Other borrowings Rs(bn)
Customer deposits (Rsbn, RHS)
1,765 2,000
100%
1,500
80%
60%
1,000
40% 78%
405 68%
62% 59% 500
20% 47%
29%
0% 0
Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Dec-23
.
Source: Company Data, Jefferies
Exhibit 5 - Among mid-size banks, IDFC First has mobilised one of the highest Exhibit 6 - IDFC First has also mobilised the highest amount of low-cost casa
amounts of retail deposits deposits among the same peer set
Mobilisation of retail deposits (LCR) between Mar-21 to Dec-23 Mobilization of CASA deposits between Mar-21 to Dec-23 (Rsbn)
(Rsbn) 500
800 396
690
400 351
600 547 292
300
407
400 189
296 200 150
226 241
138 81 86
200 123 100
101 49 50
- 0
Ujjivan RBL Equitas FB Bandhan AU YES IDFCF IIB Ujjivan Equitas RBL Bandhan FB AU YES IIB IDFCF
. .
Source: Company data, Jefferies Source: Company Data, Jefferies
Exhibit 7 - IDFC First is one of the fastest growing retail deposit franchise in Exhibit 8 - Bank's deposit mobilisation should stay buoyant with 28% Cagr in
the country deposits over FY24-27 to fund growth and aid repayment of bonds of erstwhile
IDFC Limited
YoY Growth in retail deposits (LCR) (%, 3QFY24)
50% Deposit Growth YoY (%) Share of deposits in total funds (%)
45%
42%
40% 50% 90% 93% 100%
87%
27% 80%
30% 25% 27% 40%
22% 72% 80%
20% 20% 67%
20% 16% 16% 17%
15% 30%
60%
10% 5%
20% 37% 36% 33%
0% 28%
23% 40%
10%
FB
YES
IIB
Bandhan
Axis
HDFCB
Ujjivan
RBL
Kotak
AU
ICICIBC
IDFCF
19%
Equitas
. 0% 20%
FY22 FY23 FY24E FY25E FY26E FY27E
Source: Company Data, Jefferies .

Equity Research
April 7, 2024
We expect 28% Cagr in deposits aiding 22% in loans
IDFCFB's deposit mobilisation should stay buoyant with 28% Cagr in deposits over FY24-27 to fund
growth and aid repayment of bonds of the erstwhile IDFC Limited. We expect cost pressure to ease as
high-cost bonds fall from Rs136bn now to just Rs3bn by Mar-26. Discharge of such bonds should also
help the bank cut deposit rates from FY27. Even as credit growth is likely to moderate from 25% (as of
3QFY24), it will still be healthy around 22% Cagr over FY24-27, led by retail, rural and SME loans. We
see LDR moderating from 102% now to 90% by FY25 and 84% by FY27.
Exhibit 9 - We expect credit growth to stay healthy around 22% Cagr over Exhibit 10 - ...led by strong growth in retail, rural and SME segments.
FY24-27...
Segment wise loan CAGR (FY24-27E) (%)
Loans (Rsbn) YoY growth (%, RHS)
45%
4,000 30% 34%
24% 25%
23% 23% 22% 30% 26%
21% 22% 22%
3,000 20% 15% 10%
9% 10%
0%
2,000 10%
3,571
2,952 -15%
-3% 2,419
1,000 1,895 1,968 0%
1,606 -30% -27%
1,070 1,171 1,291
Infra Corporate Overall Retail/ Rural Commercial
(legacy) Consumer
0 -10%
FY20 FY21 FY22 FY23 3QFY24 FY24E FY25E FY26E FY27E
.
. Source: Company Data, Jefferies
Exhibit 11 - The bank has gradually reduced LDR over the years, and we expect Exhibit 12 - Share of retail, rural and SME to rise; Drag of legacy infra has
this trend to continue played out
LDR (%) Loan Mix (%)

Retail (Consumer Finance) Rural Finance Commercial Finance
150%
131% Corporate Infra financing (legacy) Others
122%
120% 113% 112% 100% 2% 1% 1% 0% 0%
105% 3%
102% 97% 5%
9%
90% 86% 84% 80% 14% 15% 16%
19% 12% 12% 14%
90% 10%
8% 13% 14% 14% 15% 15%
60% 9% 12%
10%
60% 8% 10%
40% 6%
6%
30% 4% 54% 57% 59% 58% 58% 58% 58%
20% 39% 46%
26%
0%
0%
FY19 FY20 FY21 FY22 FY23 3QFY24 FY24E FY25E FY26E FY27E FY19 FY20 FY21 FY22 FY23 3QFY24 FY24E FY25E FY26E FY27E
. .
Source: Company data, Jefferies Source: Company Data, Jefferies
Exhibit 13 - Rising share of retail, rural and SME will support yields and lead to Exhibit 14 - Bank is successfully scaling up fee products and solutions with
margin expansion of +20bps over FY24-27 focus on retail banking
Yield on advances (%) NIMs (on AUM) (%, RHS) Fee/assets (%)
8.0% 3.0%
19% 6.3% 6.4% 6.4% 6.5%
6.1% 2.5%
5.7% 2.1% 2.1% 2.1% 2.2%
6.0%
1.9%
4.9% 2.0%
16%
1.4%
4.0% 1.5%
1.0%
13%
15.3% 15.2% 15.0% 14.9% 2.0%
13.6% 14.2%
13.0% 0.5%
10% 0.0% 0.0%

FY21 FY22 FY23 FY24E FY25E FY26E FY27E FY22 FY23 FY24E FY25E FY26E FY27E
. .
Source: Company Data, Jefferies Source: Company Data, Jefferies
Levers to earning growth and profitability from 2HFY25
We see earnings trajectory improving from 2HFY25 as opex efficiencies, absorption of FLDG costs,
repayment of high-cost liabilities and break-even of credit card platform play out. Over FY24-27, we see
multiple levers to earnings growth, driven by asset growth, scope for +20bps margin expansion, 10bps
rise in fee/asset ratio and +700bps fall in the cost-income ratio to 66%. We factor in a rise in credit
costs from 1.3% in FY24 to 1.8% in FY27, reflecting the rise in share of retail loans and normalisation
of the credit cycle. These can aid 28% EPS Cagr, +30bps expansion in ROA to 1.5% and +300bps rise

Equity Research
April 7, 2024
in ROE to 14%. Key risks to our thesis: higher-than-expected opex and credit costs. With high share of
fixed-rate loans (60%), IDFCFB also benefits from a fall in rates more than large banks.
Exhibit 15 - Hence, cost-to-income ratio should decline, driven by scale Exhibit 16 - Operating efficiencies (lower cost ratios) will also lead to better
benefits and improvement in productivity core profitability
Cost/Income ratio (%, ex treasury) PPoP (core) as % of avg. assets (%)

100% 4%
3.0%
78% 3% 2.6%
80% 73% 73% 2.2% 2.3%
72% 2.1%
69%
66% 2%
1.5%
1.2%
60% 1.0%
1%
40% 0%
FY22 FY23 FY24E FY25E FY26E FY27E FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E
. .
Exhibit 17 - Strong asset quality in retail portfolio across several past adverse Exhibit 18 - We see credit costs to be higher than peers given higher share of
events retail-unsecured & MFI loans
GNPA (%) NNPA (%) Stress Test 5:
Covid Credit Cost (%, of avg. funded assets)
Stress Test 2: 4.0%

4% Demonetization Stress Test 4: 4%
IL&FS Crisis
Stress Test 3: 3.1%

3% GST
2.6% 3% 2.7%
Stress Test 1:
Economic Slowdown 2.1% 2.2%
2.0% 1.9% 2.0%
1.8% 1.9% 1.8%
2% 1.7% 1.7% 2% 1.7% 1.8%
1.5% 1.5% 1.5% 1.6%
1.9% 1.3%
1.0%
1% 1.4% 1.5% 1.3% 1.2%
0.5% 1.2% 1.2% 1%
1.1%
0.3%
0.1% 0.7% 0.7%
0.6% 0.5% 0.5% 0.5%
0% 0.1% 0.0% 0.4% 0%
Sep-18
Sep-23
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Dec-23
Jun-23
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

.
.
Exhibit 19 - We expect profits to grow at 34% CAGR over FY24-27 (EPS CAGR Exhibit 20 - We see scope to realise operating efficiencies and aid earnings
of 28%) led by healthy loan growth, improving NIMs and operating leverage led growth and improvement in ROA/ROE
cost benefits
RoA (%) RoE (%, RHS)
Net profit (Rsbn) YoY growth (%, RHS)
2.0% 16%
14%
80 200%
150% 1.6% 12%
150% 11% 10% 12%
10%
60
1.2%
100%
8%
44% 41%
40 20% 17% 50% 0.8%
1.5%
1.1% 1.3%
1.1% 1.1% 4%
50 70 0% 0.4% 1%
20 -68%
29 34
24 -50% 0.1%
0.0% 0%
1
0 -100% FY22 FY23 FY24E FY25E FY26E FY27E
.
Valuations reasonable; initiate at Buy
IDFCFB's strong earnings growth and improvement in profitability should drive a rerating as valuations
are reasonable at 1.5x FY25 adj PB. Its ability to raise capital will be a key enabler as CET1 CAR is
relatively lower at 14%, ROE is lower and loan growth is higher. We factor in two capital raises in FY25
and FY27. Initiate with Buy and PT of Rs100 based on 1.6x Jun-26e adj PB.

Equity Research
April 7, 2024
Exhibit 21 - We build in two capital raises as the bank has successfully Exhibit 22 - This will also support its relatively lower level of capital adequacy
deployed growth capital in the past few years (CETI-1 CAR at 14%)
Capital raise (Rsbn) CET-1 CAR (%)
60 55 20%
45 15.3% 14.9%
16% 14.2% 14.0% 14.0%
45 13.3% 13.3% 13.7% 13.8%
13.0%
30 30 12%
30
22
8%
15
4%
-
- 0%
FY22 FY23 FY24E FY25E FY26E FY27E FY19 FY20 FY21 FY22 FY23 3QFY24 FY24E FY25E FY26E FY27E
. .
Exhibit 23 - IDFC First trades at reasonable valuations, given visbility of healthy growth, rising profitability
and better return ratios
3.5 Kotak
3.0
AU SFB ICICIBC
2.5
P/BV (x, FY25E)
HDFCB
2.0
Axis
Equitas IIB
1.5
IDFCF
1.0 FB Bandhan
RBL
0.5
0.0
6% 8% 10% 12% 14% 16% 18% 20%
RoE (%, FY25E)
.
Source: Bloomberg, Company Data, Jefferies

Equity Research
April 7, 2024
Full suite banking & most improved deposit

franchise
IDFC First Bank has built an end-to-end banking platform that straddles a broad range of customers
and products along with robust tech platforms and competitive rates. It has strong recognition among
urban clients, which has helped to mobilise >Rs500bn in retail deposits between Mar-21 and Dec-23
(30% Cagr), & is among the fastest growing banks in the sector. On lending side, it has ramped-up
presence in retail, rural & SME segments, while diversifying corporate book outside infra-loans.
Exhibit 24 - IDFC First Bank's full suite banking platform

.
Funding funnel, led by retail Bank has built one of the most improved
IDFC First Bank has been able to ramp up its deposit mobilisation quite impressively; retail LCR deposits deposit franchise across mid-sized peers
now form 58% of total deposits, which is comparable with larger private banks and higher than some
smaller private banks. Notably, between Mar-21 and Dec-23, IDFC First has mobilised among the largest
amounts in retail deposits compared to similar sized peers, and the share of these deposits is higher
than the peer group's. Casa deposits form 47% of IDFCFB's total deposits.
This has been aided by superior offerings on product, transaction banking platform and higher
interest rates/ lower fees. In the current-account segment, its First Booster Current Account, targeted
offerings for merchants, start-ups, TASCs, agri-traders, EXIM traders as well as services like liquidity
management, payment platforms, guarantees on-the-go among others have been successful offerings.
In the savings-account segment, higher interest rates, health benefits, doorstep banking, higher Cost of retail deposits is higher than larger
insurance limits, waiver of charges for 28 services, customised offerings for senior citizens, peers today but scope to narrow the gap exists
entrepreneurs, defence officials, and corporate salary accounts have been successful. Bank has also
ramped up its offerings in the Non-Resident Indian (NRI) segment. During FY23, corporate salary
deposits grew 47%, with a 64% rise in new activations, led by a higher activation rate in category
A corporate and stronger growth in cross-sell penetration (doubled YoY) across liability, asset and
investment products.
In the current-account segment, its booster account offers automatic sweep into term deposits (when
account balances cross Rs0.2mn) and no premature withdrawal penalties. Charges on other services
are also lower than other banks'. In the savings segment, while it pays comparable rates on lower-ticket
deposits, its rates are higher at higher ticket sizes (3-4% up to Rs0.5mn and 7% for balances between
Rs0.5mn and Rs500mn). Its term deposit rates are also higher than peers' in large private banks, and
it exempts/charges less on service fees, forex mark-ups, credit card rewards, etc. As a result, IDFCFB's
blended cost of retail deposits is higher than peers'. Nevertheless, we feel this is a good cost to bear,
and having leveraged the offerings, the bank will have some scope to pull back from some offers as
it scales up, like larger banks.

Equity Research
April 7, 2024
Exhibit 25 - Bank has launched targeted products to improve momentum in retail/casa deposits
.
Exhibit 26 - IDFC First has significantly improved its funding profile
Funding profile (%)

Customer deposits Certificate of deposits
Money market borrowings Other borrowings Rs(bn)
Customer deposits (Rsbn, RHS)
1,765 2,000
100%
80% 1,500
60%
1,000
40% 78%
405 68%
62% 59% 500
20% 47%
29%
0% 0
Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Dec-23
.
Exhibit 27 - Among mid-size banks, IDFC First has mobilised one of the highest Exhibit 28 - As a result, share of retail deposits (per LCR) is at the high end of
amounts of retail deposits the range, at 58%
Mobilisation of retail deposits (LCR) between Mar-21 to Dec-23 Share of retail deposits in total deposits (%, Dec-23)
(Rsbn)
80%
69%
800
690 63%
56% 56% 58%
60% 52%
600 547
41% 42% 43%
407 40%
400
296
226 241
138 20%
200 123
101
- 0%
Ujjivan RBL Equitas FB Bandhan AU YES IDFCF IIB RBL YES IIB Ujjivan AU Bandhan IDFCF Equitas Federal
. .

Equity Research
April 7, 2024
Exhibit 29 - IDFC First is one of the fastest growing retail deposit franchises in the country
YoY Growth in retail deposits (LCR) (%, 3QFY24)

50% 45%
42%
40%
30% 27% 27%

25%
22%
20% 20%
20% 16% 16% 17%
15%
10% 5%
0%
FB
YES
IIB
Bandhan
Axis
HDFCB
Ujjivan
RBL
AU
Kotak
ICICIBC
IDFCF
Equitas
.
Exhibit 30 - IDFC First has consistenly done well on funding side, driven by Exhibit 31 - IDFC First has also mobilised the highest amounts of low-cost casa
higher interest rates, brand building, strong tech platforms & service offering deposits in its peer set
Mobilisation of retail deposits (LCR) (Rsbn) Mobilization of CASA deposits between Mar-21 to Dec-23 (Rsbn)
93 500
100
78 80 81 396
400 351
75 66
61 292
54 300
50
189
200 150
23
25 81 86
100 49 50
- 0
4Q'22 1Q'23 2Q'23 3Q'23 4Q'23 1Q'24 2Q'24 3Q'24 Ujjivan Equitas RBL Bandhan FB AU YES IIB IDFCF
. .
Exhibit 32 - We see strong deposit growth for FY25-26; moderation in FY27 as high-cost bonds are repaid
Deposits Deposit Growth YoY (%)
5,000 37% 36% 40%

33%
4,000 28%
30%
23%
3,000 19%
20%
2,000 4,142
3,374
2,630 10%
1,000 1,972
1,446
1,056
- 0%
.
Exhibit 33 - Share of deposits in overall funding to reach 93% by FY27E with Exhibit 34 - Dependence on borrowings to fund growth has reduced
ramp-up of deposit franchise
Borrowings (Rsbn) Share of borrowings in total funds (%, RHS)
Deposits (Rsbn) Share of deposits in total funds (%, RHS)
1,000 60%
50%
47%
5,000 93% 100% 800
90%
87%
4,000 34% 33% 40%
80% 80% 600 28%
72% 80%
3,000 67% 20% 20%
66% 400
13% 20%
4,142
2,000 10%
3,374
53% 60% 200 7%

2,630
50%
1,972
1,825
700 574 458 530 572 451 499 389 368 329
1,056
1,446
1,000
705
651
887
- 0%
FY19
FY20
FY21
FY22
FY23
FY24E
FY25E
FY26E
FY27E
3QFY24
- 40%
FY19
FY20
FY21
FY22
FY23
FY24E
FY25E
FY26E
FY27E
3QFY24
.

Equity Research
April 7, 2024
Exhibit 35 - Bank is also gradually building a granular deposit base with share Exhibit 36 - Hence, it has lower concentration risk in deposits vs. other mid-
of top 20 depositors at 13% vs. 35% in FY19 sized peers banks
Share of top 20 largest depositors in deposits (%) Share of top 20 largest depositors in deposits (%, FY23)
50% 20 18
16 16 16
16
40% 35% 14
15
12 13
30%
23% 10
20% 16%
13% 5
10% 5
10%
0% 0
FY19 FY20 FY21 FY22 FY23 Federal YES IDFCF AU IIB Equitas RBL Bandhan Ujjivan
. .
Exhibit 37 - In case of term deposits, bank pays higher rates vs. larger banks but lower than mid-sized
peers
TD rates (%, 1-3 years)

10%
8.5% 8.5%
7.8% 7.8% 7.8% 7.9% 8.0% 8.1%
8% 7.2% 7.2% 7.3% 7.3% 7.5%
6%
4%
2%
0%
Axis
HDFCB
IDFCF
IIB
ICICIBC
RBL
Ujjivan
Kotak
Federal
AU
YES
Bandhan
Equitas
.
Exhibit 38 - Similar interest rates offerred by mid-sized banks in the common savings balance buckets
Savings interest rate IDFCF Ujjivan Equitas Bandhan IIB YES AU RBL FB
<=0.1mn 3.0% 3.5% 3.5% 3.0% 3.5% 3.0% 3.5% 4.3% 3.1%
>0.1mn & <=0.5mn 4.0% 5.0% 5.0% 6.0% 5.0% 4.0% 5.0% 5.5% 3.1%
>0.5mn & <=1mn 7.0% 7.5% 7.0% 6.0% 6.0% 5.0% 5.0% 5.5% 3.1%
>1mn & <=2.5mn 7.0% 7.5% 7.0% 7.0% 6.8% 7.0% 7.0% 6.0% 3.1%
>2.5mn & <=5mn 7.0% 7.5% 7.0% 7.0% 6.8% 7.0% 7.0% 7.5% 3.1%
>5mn & <=10mn 7.0% 7.5% 7.0% 7.0% 6.8% 7.0% 7.0% 7.5% 3.8%
>10mn & <=20mn 7.0% 7.5% 7.0% 7.0% 6.8% 7.0% 7.0% 7.5% 3.8%
>20mn & <=30mn 7.0% 7.5% 7.0% 6.3% 6.8% 7.0% 7.3% 7.0% 4.0%
>30mn & <=50mn 7.0% 7.5% 7.0% 6.3% 6.8% 7.0% 7.3% 6.5% 4.0%
>50mn & <=100mn 7.0% 7.5% 7.0% 6.3% 6.8% 7.0% 7.0% 6.5% 5.5%
>100mn & <=250mn 7.0% 7.5% 7.0% 6.5% 6.8% 7.0% NA 6.3% 5.5%
>250mn & <=500mn 7.0% 7.5% 7.8% 6.5% 6.8% 7.0% NA 6.3% 5.5%
>500mn & <=1bn 5.0% 7.5% 7.8% 8.0% 6.8% 7.0% NA 5.3% 6.0%
>1bn & <=2bn 4.5% 7.5% 7.8% 8.0% NA NA NA 6.0% 6.0%
>2bn & <=4bn 3.5% 7.5% 7.8% 8.1% NA NA NA 4.0% 7.2%
>4bn 3.5% 7.5% 7.8% 8.1% NA NA NA 6.8% 7.2%
.

Equity Research
April 7, 2024
Scale up of retail and diversification of corporate lending franchise Bank has ramped-up presence in retail rural &
In lending, the bank has ramped up presence in retail and SME segments, while diversifying its corporate SME segments
book outside infrastructure loans. It has leveraged on its earlier presence as an NBFC (Capital First) in
retail/ SME segments and built on conversion into a bank.
Exhibit 39 - Well-diversifed loan book as bank ramped up presence in retail & SME segment & built corporate book outside infra
.
Exhibit 40 - We expect credit growth to stay healthy around 22% Cagr over FY24-27...
Loans (Rsbn) YoY growth (%, RHS)
4,000 30%
24% 25%
23% 23% 22% 21%
3,000 20%
9% 10%
2,000 10%
3,571
2,952
-3% 2,419
1,000 1,895 1,968 0%
1,606
1,070 1,171 1,291
0 -10%
.
Exhibit 41 - ...And this will be aided by strong growth in retail, rural and SME segments
Segment wise loan CAGR (FY24-27E) (%)
45%
34%
30% 26%
22% 22%
15% 10%
0%
-15%
-30% -27%
Infra Corporate Overall Retail/ Rural Commercial
(legacy) Consumer
.

Equity Research
April 7, 2024
SME & rural lending segment (25% of loans) SME & rural are key growth segments & form
SME lending is a key segment for the bank as it forms 12% of its loans, and the bank has leveraged 25% of loans
strength of Capital First and added new lending verticals. The key segments include business banking,
CV/CE financing, business installment loans (BIL) and micro-business loans. We see this segment
growing at 34% Cagr over FY24-27.
The rural segment forms 13% of the bank's loans and is dominated by the micro-finance segment
and agri-linked loans such as Kisan Cedit Card (KCC), micro-housing, micro-entrepreneur and new
segments of small farming and tractor loans. We see 26% Cagr in loans in this segment for the bank.
SME and rural segments are growing well, generate good yields and help bank in meeting PSL targets,
which in turn is helping to bring down dependence on PSLCs and RIDF deposits.
Business banking (29% of SME/ 4% of overall): Business banking loans are similar to working capital Bank has leveraged on Capital First (NBFC)
loans and are driven by liability relationships. Yields are more or less in line with LAPs, as these are strengths
also secure in nature. The bank has also launched a separate app to service customers more efficently
in this segment.
CV/CE financing (22% of SME/ 3% of overall): In commercial vehicle loans, 65% of the lending is to
customers in priority sectors; this also helps in meeting PSL requirements of the bank.
Business installment loans: Business installment loans are unsecured loans for shorter tenures (2-3yrs
vs. LAP duration of 15yrs) and lower ticket sizes. However, yields are higher as these are unsecured
and are backed by cashflows.
Micro-business loans: Micro-business loans are given primarily to shopowners and professionals for
business purposes, mostly in urban markets. Such loans can be either secured or unsecured.
Micro-finance: MFI segment is the largest segment within rural loans and has been growing at a steady With rural loans, bank meets PSL needs
pace through joint liability groups (JLG). This segment scaled up after acquisition of Grama Vidiyal MFI organically
in 2017. Initially, the focus was more on southern states of Tamil Nadu, Karnataka, Kerela and now it
is expanding in central and western regions. MFI segment runs on weekly/biweekly collection model
with GNPA of <1%.
Other segments in rural segment include agriculture loans, Kisan Cedit Card (KCC), micro-housing,
micro-entrepreneur and recently started segments such as small farming and tractor loans.
Exhibit 42 - SME & rural segment are key growth drivers for the bank, with 25% share in loans & also help
in meeting PSL requirements
SME & Rural loans (Rsbn) Share in overall mix (%, RHS)
1,200 40%
30% 31%
28%
26% 30%
25%
800 22%
18% 18%
20%
15% 1,110
400 11% 881
681 10%
467 511
351
117 156 216 231
0 0%
FY19 FY20 FY21 FY22 FY23 3QFY24 FY24E FY25E FY26E FY27E
.

Equity Research
April 7, 2024
Exhibit 43 - Share of SME loans rising, driven by huge under-penetration, strong tech capabilities and
easier underwriting on the back of formalisation
Split of SME & Rural loans (%)

SME loans Rural loans
100%
80% 39% 43%

53% 55% 51% 53% 51% 50% 48%
56%
60%
40%
61% 57%
47% 45% 49% 47% 49% 50% 52%
20% 44%
0%
.
Exhibit 44 - SME loans comprise business banking, CV/CE financing and loans to professionals/shop-
owners
SME loans (%, 3QFY24)
Business banking
29%
Others
48%
CV/CE Financing
22%
.
Exhibit 45 - High growth in PSL generating segments of rural & SME takes care Exhibit 46 - As a result, net purchase of PSL certificates has come down over
of the PSL requirements of the bank the years
RIDF bonds as % of total assets (%) PSLCs bought (Rsbn) PSLCs sold (Rsbn)
3%
200
150 156
2.1% 160
2% 1.8%
1.5% 120
95
75 70
0.9% 80 65
1% 48
0.5% 43
40
15
1
0% -
FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23
. .

Equity Research
April 7, 2024
Retail finance (59% of loans) Retail loans are mostly in consumption

IDFCFB has developed a broad suite of products in the retail segment across consumption as well as segments; housing will be scaled-up
small business loans. These include loans for housing, LAP, vehicle, personal/ consumption, education,
credit card and gold, among others. The segment forms 59% of the bank's total loans and grew 29%
YoY in 3QFY24. We see some moderation here as the bank consolidates in the digital / unsecured
segments, given tightening of norms by RBI and the bank's higher share of such business vs. peers.
We expect the bank to grow at 22% Cagr in this segment over the next three years as it ramps up on
its distribution network, customer base and improves competitiveness on rates.
Consumer loan (24% of consumer loans/ 14% of overall). This segment primarily comprises
consumption loans, and includes personal unsecured loans to existing clients, loans for consumer
durables and personal loans to salaried borrowers in the open market. Our channel checks on consumer
durable loans segment indicate that IDFCFB is among the top players in the segment, right after Bajaj
Finance, across offline and online channels, and has leveraged the domain expertise of e-Capital First
well. Its cross-sell personal loan segment is similar to that of Bajaj Finance that also offers follow-
on loans to customers, whereas the salaried-personal loan segment is a bank-like, low-risk low-yield
segment of credit.
LAP (20% of consumer/12% of overall): LAP has been a domain expertise segment for the bank given
its presence since e-Capital First days. This is among their largest retail credit segment with loans
against security of residential and commercial premises. The ticket size of the portfolio is Rs11mn and
incrementally, quality of sourcing has improved.
Home Loans (19% of consumer/11% of overall): The bank offers home loans to salaried as well as Branch-based origination of housing loans is
self-employed borrowers. The urban market forms the bulk of the book, with ticket size of Rs4-5mn rising and can scale up
vs. Rs1.5-2mn in non-urban markets. Over the past few years, the bank has increased its focus on
prime home loans, supported by acquisition through its bank branches, which also helps build liability
relationships. However, the share of branch originations is lower at 25-30% vs. larger peers at 50-70%,
given low vintage of branches. We expect this to improve over the coming years.
Vehicle loans (16% of consumer/10% of overall): About 2/3rd of the portfolio consists of 2-wheelers,
where the bank has been present for long (as Capital First). The bank has also been in the used-car loan
segment for several years (as e-Capital First) and is now building on new cars. While new-car loans
generate much lower yields, the segment is also a good tool for acquisition and cross-sell to liability
clients.
Credit card (4% of consumer/3% of overall): IDFC First introduced credit cards in Jan-21 with Credit-cards business should turn profitable
customised products to target different customer segments. It has also launched credit cards that are from FY26
issued against fixed deposits. The bank offers lower charges, better rewards, lower forex fee etc on
these cards, and this has helped them connect better with clients. The bank is investing in this segment
and aspires to make it profitable from FY26 onwards. As of Feb-24, the bank had 2.5mn credit cards
outstanding, with 2% market share.
Education & Gold loans (3% of consumer/1% of overall): The bank is also ramping up education
and gold loans. The education loan segment was launched in early 2022 and forms 2% of the bank's
consumer loans and 1% of overall loans. It is also gradually scaling up the gold loan business since its
launch 2 years ago. Gold loans form 1% of the consumer loans and 0.4% of total, and are also eligible
to be counted as PSL loans.
Others (Ecommerce & digital Loans) (14% of consumer loans/ 8% of total): This segment comprises
primarily ecommerce and digital unsecured loans, including BNPL. We believe this segment may see
some slowdown as the bank cuts loan growth, given tightening of regulations on unsecured loans,
some softness in consumption spending and need to be cognizant of capital adequacy (CETI-1 CAR
at 14%).

Equity Research
April 7, 2024
Exhibit 47 - We expect retail finance to grow at 22% CAGR, in line with overall bank growth
Retail Loans (Rsbn) Share in mix (%, RHS)
2,500 75%
57% 59% 58% 58% 58% 58%

2,000 54% 60%
46%
1,500 39% 45%
26%
1,000 2,066 30%
1,707
1,400
500 1,114 1,138 15%
910
693
418 538
292
- 0%
.
Exhibit 48 - Personal loans, mortgage backed and auto loans contribute c.80% of the retail lending
portfolio
Split of Retail loans (%, 3QFY24)

Others (inc. Ecomm
& digital)
Gold Loans 14%
1%
Education Loans Consumer Loans
2% 24%
Credit card
4%
Wheels
16%
Loan against
property
20%
Home loans
. 19%
Exhibit 49 - Retail loan growth to move to more sustainable levels of 21-22%
YoY Growth in retail loans (%) Share in mix (%, RHS)
40% 70%
57% 58% 58% 58% 58%

60%
30% 54%
50%
20%
31% 40%
29%
25% 23%
10% 22% 21%
30%
0% 20%
.

Equity Research
April 7, 2024
Corporate segment (15% of loans) Bank has also ramped up corporate lending
In the corporate lending segment, the bank transitioned its exposure from the legacy business of beyond infra with lower concentration
infrastructure project lending and from large-ticket lending to a more diversified and mid-sized lending.
Since FY19, the bank has reduced exposure to corporate from 29% to 15%, to infrastructure sector
from 19% to less than 2%, to top-20 single borrowers from 16% to 6%, and to top-5 industries from
41% to 19%.
The bank has ramped up its offering in corporate lending to be identical to that of larger banks across
term loans, working capital loans. Over the past few years, it has developed a full suite of products
encompassing lending & liability accounts, trade financing, financial markets, cash management,
payments handling and debt syndication. Its FIG team engages with clients across financial services,
government institutions and multi-lateral agencies. This is also a liability-intensive segment for the
bank. The bank has also developed strong relationships with over 260 global banks in 56 countries to
provide seamless service to local customers with banking needs offshore.
Exhibit 50 - We expect corporate (non-infra) loans to grow 10% CAGR between FY24-27E with lower share
in mix as loan growth is led by retail, rural & SME segments
Corporate loans (Rsbn) Share in mix (%, RHS)

500 35%
29%
400 28%
23%
19% 18%
300 21%
16%
15% 15%
13%
200 12% 14%
11%
100 7%
322 245 225 237 259 282 287 316 348 383
- 0%
.
Exhibit 51 - Run-down & associated drag of legacy infra book has largely played out
Legacy infra loans (Rsbn) Share in mix (%, RHS)
300 25%
19%
250
20%
200 14%
15%
150
9%
10%
100
5%
3% 5%
50 2% 1% 1% 0% 0%
- 0%
.

Equity Research
April 7, 2024
Exhibit 52 - Visible results from efforts to reduce risks in corporate lending, Exhibit 53 - ...significantly lower exposure to top-20 single borrowers and top-5
reflected by... industries
Exposure to top 20 single borrowers (%) Exposure to top 5 industries (%)
20% 50%
16% 41%
40% 35%
15% 13%
12%
30% 27%
9% 24%
10% 22%
7% 19%
6% 20%
5%
10%
0% 0%
FY19 FY20 FY21 FY22 FY23 3QFY24 FY19 FY20 FY21 FY22 FY23 3QFY24
. .

Equity Research
April 7, 2024
We expect 28% Cagr in deposits aiding 22% in loans Strong deposit growth to drive healthy loan
growth with scope for cost pressures to ease
IDFCFB's deposit mobilisation should stay buoyant with 28% Cagr in deposits over FY24-27 to fund
growth and aid repayment of bonds of the erstwhile IDFC Limited. We expect cost pressure to ease
as high-cost bonds fall from Rs136bn in Mar-24 to Rs3bn in Mar-26E. Discharge of such bonds should
also help the bank cut deposit rates from FY27. We estimate that Credit growth, though it will moderate
from 25% now, will still be healthy around 22% Cagr over FY24-27, led by retail, rural and SME loans.
We also see LDR moderating from 102% now to 90% by FY25 and 84% by FY27.
Exhibit 54 - We expect the bank to recalibrate loan growth down towards more sustainable levels of
21-22%
Funded assets growth YoY (%)
30%
24% 25%
23% 23% 22% 21%
20%
9% 10%
10%
-3%
0%
-10%
.
Exhibit 55 - Overall growth of 25% YoY in 3QFY24 was aided by faster growth in commercial/SME, rural
and retail segments
Segment wise loan growth YoY (%, 3QFY24)

80%
59%
60% 47%
40% 29%
25%
20% 11%
0%
-20%
-40%
-60% -46%
Infra (legacy) Corporate Overall Retail Rural Commercial
.
Exhibit 56 - The bank has gradually reduced LDR over the years and we expect Exhibit 57 - Similiar size peers operate with LDR in the range of 80-90% and
this trend to continue thus bank needs to catch up
LDR (%) LDR (%, 3QFY24)

150% 110%
131%
122% 102%
120% 113% 112%
105% 102% 100%
97%
90% 86% 94%
84%
90% 90% 90%
89%
90% 86% 86%
60% 83% 83%
80%
30%
0% 70%
FY19 FY20 FY21 FY22 FY23 3QFY24 FY24E FY25E FY26E FY27E Federal AU RBL Ujjivan IIB YES Equitas Bandhan IDFCF
. .

Equity Research
April 7, 2024
Exhibit 58 - Bank also needs to be cognizant about capital adequacy (CETI-1 CAR at 14%)
CET-1 CAR (%)
20%
15.3% 14.9%
16% 14.2% 14.0% 14.0%
13.3% 13.3% 13.7% 13.8%
13.0%
12%
8%
4%
0%
.
Exhibit 59 - We expect deposit mobilisatio to stay robust at 28% CAGR over FY24-27
Deposits growth YoY (%)

50%
36% 37% 37% 36%
40% 33%
28%
30% 23%
19%
20%
10%
0%
-10%
-8%
-20%
.
Exhibit 60 - We expect deposit growth to be broad-based with marginally higher growth for current (higher
focus area) and term deposits (higher interest rates)
Segment wise deposit CAGR (%, FY24-27E)

40%
32% 28% 28% 29%

27% 28%
24%
16%
8%
0%
Savings CASA Overall Current Term
.

Equity Research
April 7, 2024
Exhibit 61 - We expect CASA ratio to slightly come off & stabilise towards 46% with tad higher growth in
curent vs. savings deposits
CASA ratio (%)

70%
60% 52%
48% 50%
47% 47% 46% 46% 46%
50%
40% 32%
30%
20% 13%
10%
0%
.
Exhibit 62 - In order to boost savings flow, bank pays higher interest rate, Exhibit 63 - Bank has also waived charges for 28 services to attract retail
offers health benefits, doorstep banking among others customers
.
.
Exhibit 64 - We see deposit cost pressure to ease as repayment of high-cost bonds falls from Rs136bn
now to Rs51bn in FY26 and only Rs3bn thereafter.
Balance Repayment schedule
RoI (%)
(Dec-23) 4QFY24 FY25 FY26 Beyond FY26
Legacy long term bonds 60 13 11 36 - 8.9%
Legacy infrastructure bonds 59 - 51 8 - 8.9%
Refinance 9 - 9 - - 8.3%
Other bonds 7 - 1 3 3 9.1%
. Total 136 13 72 47 3 8.9%

Equity Research
April 7, 2024
Multiple levers to high earning growth & improving

profitability
We expect earnings trajectory to improve from 2HFY25 as opex efficiencies, absorption of FLDG costs,
repayment of high-cost liabilities & break-even of credit card platform play out. Over FY24-27, we see
multiple levers to earnings growth, driven by asset growth, scope for +20bps margin expansion, 10bps
rise in fee/asset ratio and +700bps fall in the cost-income ratio to 66%. We factor in a rise in credit
costs from 1.3% in FY24 to 1.8% in FY27, reflecting the rise in share of retail loans and normalisation
of the credit cycle. These can aid 28% EPS Cagr, +30bps expansion in ROA to 1.5% and +300bps rise
in ROE to 14%. Key risks to our thesis: higher-than-expected opex and credit costs. With high share of
fixed-rate loans (60%), IDFCFB also benefits from a fall in rates more than large banks.
Margins can improve and fee/asset can rise Margin expansion will be led by growth in
In FY24-25, we expect funding cost pressures to be higher as interest rates have risen, liquidity is tight retail/ SME loans; funding costs will also fall
and smaller banks will see higher inflation in funding costs. We also see tailwinds for the bank from
FY26 from potential easing in interest rates/ liquidity and reduced need to refinance the funding of IDFC
Ltd (bonds/ high cost bonds) that today are averaging at c.Rs50-60bn per annum and will end in FY26.
Moreover, as the repayment obligation on borrowings tapers off, the bank can also lower its deposit
rates in FY27, which should support its ability to sustain higher NIMs. Growth in assets and rise in NIMs
can aid 24% Cagr in NII over FY24-27.
Exhibit 65 - Higher share of lower-cost deposits and lower share of higher-cost borrowings in FY27 vs.
today
Share in overall borrowings (%)
FY23 FY27E
60%
50%
50%
40% 36%
32%
28% 28%
30%
20%
11%
7% 7%
10%
0%
Current Deposits Savings deposits Term Deposits Borrowings/Bonds
.
Exhibit 66 - We expect margins to improve, led by lower cost of funds as high-cost borrowings are
replaced by lower-cost deposits and rising share of retail in the loan mix
Yield on advances (%) Cost of funds (%) NIMs (on AUM) (%, RHS)
8.0%
19% 6.3% 6.4% 6.4% 6.5%
6.7% 6.1%
5.7%
6.0%
6.3% 6.3%
4.9% 6.0% 5.7%
16% 5.6%
5.1% 4.0%
13%
15.3% 15.2% 15.0% 14.9% 2.0%
13.6% 14.2%
13.0%
10% 0.0%
FY21 FY22 FY23 FY24E FY25E FY26E FY27E
.

Equity Research
April 7, 2024
Exhibit 67 - IDFC First Bank will also benefit from falling rates as it has a relatively higher share of fixed
loans in comparison to other large banks
Share of fixed rate advances in overall advances (%)
60% 60%
60%
45%
31% 31% 32%
30%
16%
15%
0%
Kotak ICICIBC Axis HDFCB IIB IDFCF
.
Data for HDFC Bank calculated for merged entity, using 4Q numbers; for IIB, data is for 4QFY24
Exhibit 68 - Thus, despite margins being high, it can further expand as share of higher cost borrowings
declines & mix of retail, rural & SME improves
NII (Rsbn) NIM (%, on AUM)
400
6.4% 6.4% 6.5% 7.0%

6.3%
320 6.1%
5.7% 313
253 6.0%
240 4.9% 204
165 5.0%
160 4.0%
126
97 4.0%
61 74
80 3.0%
0 2.0%
.
IDFCFB has built diversified sources of fees across retail and commercial segments and its fee/ asset Fee income can ramp up as recent product
ratio is higher than larger banks'. Many of these products and services are in early stages of their launches gain scale along with rise in
lifecycle and hold potential to grow in the future. Still, we believe that the bank has headroom to expand monetisation opportunities
its fee/ asset ratio better by monetizing segments like forex (retail & commercial), retail fees (many
services offered free of cost) as well as commercial banking services. The bank is trying to design
product/solutions where the fee structure is transparent and easy to explain. It aspires to generate
fee income through sale of insurance, mutual funds and other wealth management products. It has
significantly expanded its wealth management business over the past 18 months. As of today, more
than 90% of fee and other income come from retail banking, which is granular and sustainable. Over
FY24-27, we expect the bank's fees to grow at 24% Cagr and fee/ asset ratio to rise towards 2.2%.

Equity Research
April 7, 2024
Exhibit 69 - Well-diversified fee mix with retail contributing over 90% of total Exhibit 70 - Strong growth in fee income from credit cards, fastag/toll and
fees wealth management/third party distribution
Fee mix (%, (9MFY24) Segment wise YoY growth in fees (%,9MFY24)
Trade & Client Fx
120%
8% 103%
100%
WM/ Thrid Party Loan Origination
Distribution fees 80% 68%
16% 33%
60%
41% 41%
40%
22%
20%
0%
Credit Card & Toll 0%
18% Trade & Client General Loan Overall Credit Card & WM/ TPT
General Banking Fx Banking Origination Toll Distribution
fees
.
26% Source: Company Data, Jefferies
.
Exhibit 71 - Despite not charging for 28 common services, fee/ asset ratio of IDFC First Bank is higher
than larger banks'
Fee/assets (%, FY24E)

2.5%
2.1%
2.0%
1.7%
1.6%
1.5%
1.5%
1.2%
1.1%
1.0%
0.5%
0.0%
HDFCB ICICIBC Axis Kotak IIB IDFCF
.
Source: Company Data, Jefferies; For HDFC Bank, data is for merged entity
Exhibit 72 - Bank is successfully scaling up fee products and solutions with focus on retail banking
Fee/assets (%)
3.0%
2.5% 2.2%
2.1% 2.1% 2.1%
1.9%
2.0%
1.4%
1.5%
1.0%
0.5%
0.0%
.

Equity Research
April 7, 2024
Exhibit 73 - Unlike its peers, IDFC First does not charge any fee for 28 popular Exhibit 74 - ...including cash deposits/withdrawals, NEFT, RTGS, IMPS & debit
services in savings account... cards among others
Service Fee charged by peer banks IDFC First Service Fee charged by peer banks IDFC First
IMPS charges Demand Draft/ Pay Order
Rs. 2.5 - 15 per transaction Free
(outward) issuance charges at Rs.150 - 15K depending on item and amount Free
NEFT charges branches
Rs. 2 - 24.75 per transaction Free
(outward at branches) Interest certificate issuance
Rs.50 - 100 per request Free
RTGS charges charges
Rs.13.5 - 45 per transaction Free
(outward at branches) Account closure
Rs.0 - 500 per account Free
Cheque book Rs.2 - 4 per additional leaf, charges
Free
re-issuance charges post regular allowance ECS return
Rs.450 - 550 per instance Free
SMS alert charges Rs. 0.15 - 0.55 per alert Free charges
Cash deposit & withdrawal International ATM/POS Rs. 25 - 150 per transaction
Rs.150 per transaction, Free
charges at branches (by Free transaction charges Markup- 3.5%
post limit
number) Decline charges for
Rs. 25 per transaction Free
Cash deposit & withdrawal insufficient ATM balance
Rs.150 per transaction,
charges Free Standing instruction
post limit Rs. 150 - 200 per instance Free
at branches (by value) charges
Third Party cash deposit Debit Card issuance
Rs.150 per transaction, Rs. 199 - 500 per instance Free
and withdrawal charges at Free charges (first year)
post limit of Rs25K
branches … and 12 other services Fee as applicable Free
. .
Operating efficiencies key to healthy growth & ROA Investment in distribution & new launches kept
IDFC First Bank has been in investment mode for the last few years as it took steps to transition from C/I high
a NBFC/ infra-lender to a retail bank. Given the early stage investments and smaller scale, its cost/
income ratio at 74% in 3QFY24 is among the highest across banks and a key drag on its profitability
(ROA of 1.1%). In the retail segment (c.60% of assets), operating costs have been upfronted in people,
branches, product launches, technology platforms and branding.
One of the most cost-heavy segments was credit cards, where the bank may just be about breaking
even, but we see operating leverage playing out over the next 2-3 years and aiding profitability. In the
credit card segment, IDFC First has made the platform easier for customers to claim monetary value
of their points, which tends to affect profitability but should aid in the medium term to ramp up the
client base in a competitive market.
Hence, we believe that costs can remain a drag until 2QFY25 towards new investments and costs
towards FLDG arrangements (where credit cost is first borne by the originating platform). However,
we see stronger improvement in profits from 2HFY25 as operating leverage, break-even of credit card
platform and utilisation of FLDG costs play out.
Retail liability also operates at higher cost/income ratio given recency of branches (36% are sub 3yrs We see scope for improvement of +700bps in
old vs. ~15% for larger banks), higher interest rates on deposits and exemption of fees on many retail C/I ratio as operating leverage benefits kick in
fees. The ramp-up of branches on deposits, customers and fees will also aid in improving cost ratios
further in coming years.
With growth in the business, we see steady fall in the bank's cost-to-income ratio. We expect costs to
grow at 20% Cagr over FY24-27 and cost/ income ratio to moderate towards 69% in FY26 and then
to 66% in FY27. This should help improve PPOP/ avg. asset from 2.2% in FY24 to 2.6% by FY26 and
3% in FY27.

Equity Research
April 7, 2024
Exhibit 75 - High C/I ratio as the bank is an investment phase as it transitions Exhibit 76 - Employee, marketing and rent are some of the bank's main
from an infra lender to a retail bank expenses
Cost (Rsbn) Cost/Income (%, ex treasury) Opex mix (%)

Advertisement Postage, telegrams,
146% Depreciation
150 160% 2% telephones
Rent, taxes and 3%
1%
lighting
120 4%
120%
90 79% 79% 78%

73%
80% Employee cost
60 122 31%
96 Other expenses
71 40%
30 59 59 59%
- 0%
FY19 FY20 FY21 FY22 FY23
. .
Exhibit 77 - IDFC First has increased branch network at 16% CAGR over the Exhibit 78 - Hence, proportion of branches up to 3 years old is highest for IDFC;
past 3 years productivity to improve as branches season
Branch network Share of upto 3 year old branches in total (%, Dec-23)
1,000 897 50%
809
800 40% 36%
641 32%
596 30%
600 30%
464
400 20% 17%
13% 14%
242
200 10%
0 0%
FY19 FY20 FY21 FY22 FY23 3QFY24 Axis Kotak ICICIBC IIB HDFCB IDFCF
. .
Exhibit 79 - Employee strength grew faster at 20% CAGR (FY20-23) with Exhibit 80 - Hence, IDFC First has relatively higher share of newer employees
expansion of branch network and growth in size of bank
Share of upto 3 year old employees in total (%, Dec-23)
Employee strength
50%
43% 43%
45,000
40% 35%
35,352 32%
36,000
27,804 30%
24,169 23%
27,000 20%
20,222 20%
18,000
12,257 10%
9,000
0%
0 IIB Axis Kotak ICICIBC IDFCF HDFCB
.
. Source: Company Data, Jefferies; Data is as of FY23 for IDFC First, Kotak and IndusInd Bank
Exhibit 81 - Several products launched in the past 2 years and scale up offers scope to ease costs
.

Equity Research
April 7, 2024
Exhibit 82 - Being a new bank (since 2015), it is in investment phase as it Exhibit 83 - ...therefore cost metrics are sharply higher vs. larger banks who
transitions from an infra lender to retail bank and... have been around for much longer
Cost/Income ratio (%, ex. treasury - FY24E) Cost/assets ratio (%, ex. treasury - FY24E)
80% 73% 7%
6.1%
6%
60%
50% 5%
48% 47%
42% 41% 4%
40% 3.1%
2.9%
3% 2.3% 2.5%
2.1%
2%
20%
1%
0% 0%
HDFCB ICICIBC IIB Axis Kotak IDFCF HDFCB ICICIBC Axis IIB Kotak IDFCF
. .
Exhibit 84 - Due to high cost-to-income ratio, PPoP return is lower for IDFC First in comparison to peers
PPoP (core) as % of avg. assets (%, FY24E)

4%
3.5%
3.3%
3.2%
3%
2.5% 2.6%
2.2%
2%
1%
0%
IDFCF HDFCB Axis IIB ICICIBC Kotak
.
Exhibit 85 - But we expect it to improve and close the gap vs. peers over the next few years, led by
operating efficiencies (lower cost ratios)
PPoP (core) as % of avg. assets (%)

4%
3.0%
3% 2.6%
2.2% 2.3%
2.1%
2%
1.5%
1.2%
1.0%
1%
0%
.

Equity Research
April 7, 2024
Exhibit 86 - We expect cost growth to gradually come down as the bank starts to reap benefits of past
investments
Cost (Rsbn) YoY growth (%, RHS)
300 36% 40%

32%
250
26% 30%
200 22%
19% 18%
150 20%
100
10%
50
96 122 161 197 233 275
0 0%
.
Exhibit 87 - Hence, cost-to-income ratio should decline, driven by scale Exhibit 88 - Similar gains to be seen in cost-to-asset ratio as past investments
benefits and improvement in productivity start paying off
Cost/Income ratio (%, ex treasury) Cost/assets ratio (%, ex treasury)

100% 8%
6.1% 6.1% 5.9%

5.7% 5.7%
78% 6% 5.5%
80% 73% 73% 72%
69%
66% 4%
60%
2%
40% 0%
FY22 FY23 FY24E FY25E FY26E FY27E FY22 FY23 FY24E FY25E FY26E FY27E
. .
Credit costs to rise from cyclical lows, but well-priced Credit costs to rise, reflecting higher share of
As of now, the bank's gross & net NPL ratio are at 2% and 0.7% of loans, but adjusted for legacy infra- retail loans & normalisation of credit-cycle
NPLs, gross & net NPL ratio are at 1.7% and 0.5%. Given the higher share of loans in segments like
SME/ MFI/ retail and lower share of housing, corporate loans, the bank's credit costs will stay higher
around 1.3% of loans in FY24 and in fact this will rise further towards 1.8% by FY27 with rise in share
of retail/ rural/ SME loans and normalisation of credit costs. Still, we feel the bank has also developed
reasonable credit-control metrics, recovery platforms and has priced loans for risk. We also believe the
bank has sufficient coverage on corporate stressed loans, infra-loans carry 62% provisions, and any
recovery from these loans would help improve coverage buffers or reduce credit costs.

Equity Research
April 7, 2024
Exhibit 89 - Summary of asset quality: IDFCFB can sustain asset quality at these levels given stringent
underwriting norms & improvement in risk profile of customers
Asset Quality Summary (%) FY22 FY23 9MFY24 FY24E FY25E FY26E FY27E
GNPA (overall Bank) 3.7% 2.5% 2.0% 2.0% 2.0% 2.1% 2.1%
NNPA (overall Bank) 1.5% 0.9% 0.7% 0.7% 0.7% 0.7% 0.7%
PCR (overall Bank) 60% 66% 67% 67% 68% 68% 70%
Slippage ratio (gross) 7.5% 3.9% 3.5% 3.6% 3.5% 3.5% 3.5%
Slippage ratio (net) 4.3% 1.9% 1.9% 1.8% 1.9% 2.0% 2.0%
Credit costs (%, avg funded assets) 2.7% 1.8% 1.3% 1.3% 1.6% 1.7% 1.8%
Segmental GNPA
Retail, rural and SME finance 2.6% 1.7% 1.5%
Corp (non-infra) 2.8% 2.9% 2.9%
Infra (legacy) 21.6% 25.1% 26.7%
Segmental NNPA
Retail, rural and SME finance 1.2% 0.6% 0.5%
Corp (non-infra) 0.3% 0.0% 0.3%
Infra (legacy) 11.8% 15.7% 16.2%
Segmental PCR
Retail, rural and SME finance 70% 82% 86%
Corp (non-infra) 98% 100% 95%
. Infra (legacy) 52% 56% 62%

Exhibit 90 - Faster growing segments of retail, rural & SME have demonstrated low NPA levels across
cycles
GNPA (%) NNPA (%)

26.7% 16.2%
10%
8%
6%
4% 2.9%
1.7% 2.0%
2% 1.5%
0.5% 0.5% 0.7% 0.3%
0%
Retail, Rural & Overall Bank Overall Bank Corporate Infra
SME (exc. infra) Level (Non-infra)
.
Exhibit 91 - Well managed asset quality in retail portfolio across past cycles (exCovid) for Capital First
(NBFC) & IDFC First Bank
GNPA (%) NNPA (%) Stress Test 5:
Covid
Stress Test 2: 4.0%
4% Demonetization Stress Test 4:
IL&FS Crisis
Stress Test 3:
3% GST
2.6%
Stress Test 1:
Economic Slowdown 2.1% 2.2%
2.0% 1.9% 2.0%
1.8%
2% 1.7% 1.7%
1.5% 1.5% 1.5%
1.9%
1.0%
1% 1.4% 1.5% 1.3% 1.2%
0.5% 1.2% 1.2%
1.1%
0.3%
0.1% 0.7% 0.7%
0.6% 0.5% 0.5% 0.5%
0% 0.1% 0.0% 0.4%
Sep-18
Sep-23
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Dec-23
Jun-23
.

Equity Research
April 7, 2024
Exhibit 92 - Within retail, risks are well managed across segments
GNPA & NNPA (3QFY24)

3%
GNPA (%) NNPA (%)
2.1%
1.9% 1.8%
2% 1.6% 1.5% 1.4%
0.9% 0.8% 0.8%

1% 0.8%
0.4% 0.5% 0.4% 0.5% 0.4%
0.2%
0%
LAP Credit card Vehicles Consumer Digital, SME loans Home Rural
loans gold & loans finance
others
.
Exhibit 93 - Stable trends in SMA book; Low SMA will also lead to lower NPA Exhibit 94 - Consistent improvement in standard restructured book of the bank
formation in future
Standard restructured book of the bank (%)
SMA-1 & SMA-2 (% of Retail, Rural & SME Loan book)
0.8%
1.5%
1.3% 0.6%
0.6%
1.2% 0.5%
0.9% 0.9% 0.9% 0.9% 0.4%
0.9% 0.8% 0.4% 0.4%
0.8%
0.6% 0.2%
0.3%
0.0%
0.0% 4QFY23 1QFY24 2QFY24 3QFY24
1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24
.
Exhibit 95 - Net stressed assets seems to have stabilised at c.0.7% of total assets
Net stressed Assets (Net NPA + Net SRs + Net Restructured Assets)
2.5%
2.0%
2.0%
1.7%
1.5% 1.3%
1.2%
1.0% 0.8%
0.7% 0.7% 0.7%
0.5%
0.0%
4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24
.
Exhibit 96 - Low cheque bounce rate indicates good quality of fresh loan Exhibit 97 - ... is further supported by high and stable collection efficiency
bookings and...
Collection efficiency (%, exit month of quarter)
Cheque bounce rate (First EMI) (%)
99.4% 99.5% 99.6% 99.5% 99.5% 99.6%
100%
8.0%
6.6% 6.6% 6.5% 6.6% 80%
6.3%
6.0% 60%
5.0%
4.0% 40%
20%
2.0%
0%
0.0% 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24
2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24
.

Equity Research
April 7, 2024
Exhibit 98 - Slippage ratio should stabilise at current levels as normalisation in slippages is offset by
improvement in risk profile of customers
Slippage ratio (%, gross)
8% 7.5%
6.6%
6%
3.9%
4% 3.6% 3.5% 3.5% 3.5%
3.1%
2%
0%
.
Exhibit 99 - We see credit costs to rise given higher share of retail-unsecured loans and asset quality
normalisation but bank has priced for higher risk
Credit Cost (%, of avg. funded assets)
4%
3.1%
3% 2.7%
1.9% 1.8%
2% 1.7% 1.8%
1.6%
1.3%
1%
0%
.
Healthy earnings growth and ROA expansion Better margins & fees & better op. efficiencies
Aided by healthy topline growth and operating efficiencies, we expect ROA to improve from 1.1% in will cover-up for higher credit costs; We see
FY24 to 1.5% by FY27. ROE can improve from 10% in FY24 to 14% by FY27. Over FY24-27, we expect improved ROA/ROE & higher EPS growth
IDFC First Bank's profit to grow at 34% Cagr and EPS to grow at 28% Cagr, gap between profit and EPS
arises due to share issuance. Earnings are more sensitive to changes in opex than to changes in loan
growth, NIM and credit costs. While profitability is lower than peers, we expect earnings growth runway
to be favorable given its smaller size and scope to realise operating efficiencies.
Our sensitivity analysis to FY25 shows that FY25 profit can get impacted by (1) 3% if loan growth
assumption changes by 100bps, (2) 3% for every 5bps change in NIM, (3) 6% if cost/income rises by
100bps and (4) 5% if credit cost is higher by 10bps. The bank has higher share of fixed-rate loans at
60% and shorter duration of liabilities, hence will benefit from easing in liquidity environment and fall
in interest rates.

Equity Research
April 7, 2024
Exhibit 100 - We expect profits to grow at 34% CAGR over FY24-27 (EPS CAGR of 28%) led by healthy loan
growth, improving NIMs and operating leverage led cost benefits
Net profit (Rsbn) YoY growth (%, RHS)
80 200%
150%
150%
60
100%
44% 41%
40 20% 17% 50%
50 70 0%
20 -68%
29 34
24 -50%
1
0 -100%
.
Exhibit 101 - Earnings are more sensitive to changes in opex than to changes in loan growth, NIM and
credit costs.
Adverse impact on FY25 earnings (%) due to
5.9%
6%
4.8%
4% 3.3%
2.7%
2%
0%
100bps lower loan 5bps decrease in NIM 10bps higher credit 100bps increase in C/I
growth cost ratio
.
Exhibit 102 - We see scope to realise operating efficiencies and aid earnings growth and improvement in
ROA/ROE
RoA (%) RoE (%, RHS)
2.0% 16%
14%
1.6% 12%
11% 10% 12%
10%
1.2%
8%
0.8%
1.5%
1.1% 1.3%
1.1% 1.1% 4%
0.4% 1%
0.1%
0.0% 0%
.

Equity Research
April 7, 2024
Exhibit 103 - Bank's guidance for next five years

Particulars Dec-18 Dec-23 Mar-29 Assumptions
Deposits
Branches (#) 206 897 1700-1800 Will open based on requirements to meet deposit goals
Customer Deposits (Rsbn) 385 1,765 5,850 Guidance 2.0 at 5Y CAGR of 25% vs current YoY growth rate of 43%
CASA Deposits (Rsbn) 53 855 2,850 Guidance 2.0 at 5Y CAGR of 25% vs current YoY growth rate of 27%
Term Deposits (Rsbn) 332 910 3,000 Guidance 2.0 at 5Y CAGR of 25% vs current YoY growth rate of 59%
Assets
Loans & Advances (Rsbn) 1,047 1,895 5,000 Guidance 2.0 at 5Y CAGR of 20% vs current YoY growth rate of 25%
Total Assets (Rsbn) 1,569 2,707 7,000 Guidance 2.0 at 5Y CAGR of 20% vs current YoY growth rate of 22%
Asset quality
GNPA % 2.0% 2.0% 1.5% Currently, GNPA is 1.66% as of 31-Dec-23 excluding Infra loans
NNPA % 1.0% 0.7% 0.4% Currently, NNPA is 0.47% as of 31-Dec-23 excluding Infra loans
Profitability
Profit (Rsbn) -15* 22** 120-130 At about 1.9-2% of estimated ROA of FY29
ROA % - 1.2% 1.9-2% Business model naturally geared for 2% ROA
. ROE % - 10.7% 17-18% Business model naturally geared for 18% ROE

Exhibit 104 - In terms of ROA and ROE delivery, IDFC First is at the lower end of Exhibit 105 - ... it can bridge the gap over the next few years led by healthy loan
the range vs. peers but... growth & operating efficiency kicking in
RoA (%, FY25E) RoE (%, FY25E)

4.0% 25% 23%
3.0%
20% 18% 18%

17%
2.3%
3.0% 16%
2.2%
2.2%
15% 16%
14% 14%
1.9%
1.9%
14%
1.8%
1.7%
15%
1.6%
2.0%
1.3%
10% 10%
1.1%
1.1%
10%
0.5%
1.0% 5%
5%
0.0% 0%
FB
Yes
IDFCF
FB
IIB
Yes
IDFCF
ICICIBC
AU SFB
Kotak
HDFCB
Equitas
Ujjivan
HDFCB
Axis
IIB
ICICIBC
Bandhan
Axis
AU
Equitas
Kotak
Bandhan
Ujjivan
RBL
RBL
. .
Source: Company Data, Jefferies; Used consensus estimates for uncovered stocks Source: Company Data, Jefferies; Used consensus estimates for uncovered stocks
We factor in two capital raises in FY25 & FY27 We build two capital raises of Rs45bn and
With Common Tier I CAR at 14% as of Dec-23, healthy growth prospects and lower ROE, we believe the Rs55bn in FY25 and FY27 to support strong
bank will need to raise capital over the next 12 months or so. We have factored in Rs45bn of capital growth
raising in FY25, which equates to 14% of net worth for FY24e and will lift CET-1 CAR by 160bps to 14%
and Rs55bn of capital in FY27 that would equate to 12% of FY26 net worth, adding 140bps to CET-1
CAR & taking it to 14%. Our growth assumptions are also dependent on the ability to raise such capital,
and a delayed capital raise would affect growth estimates.
Exhibit 106 - IDFC First has raised and successfully deployed growth capital in the past few years
Capital raise (Rsbn)
60 55
45
45
30 30
30
22
15
-
-
.

Equity Research
April 7, 2024
Exhibit 107 - IDFC First has lower CET-1 ratio in comparison to peer banks
CET-1 ratio (%, Dec-23)

25% 22.0%
19.7% 20.1% 20.2%
20%
16.0% 16.1% 16.3% 16.9%
13.7% 14.0% 14.6%
15% 12.6% 13.5%
10%
5%
0%
FB
Yes
IDFCF
IIB
Axis
ICICI
Kotak
AU SFB
Ujjivan
HDFC
Equitas
RBL
Bandhan
.

Equity Research
April 7, 2024
Valuations reasonable; initiate at Buy Stock trades at reasonable valuations,

improved ROE will aid rerating
The stock is trading at 1.5x FY25E adjusted PB and 17x FY25E PE, which is in line with peers. Strong
earnings growth and improvement in ROA /ROE will drive stock returns. Its ability to raise capital will
be a key enabler as CET1 CAR is relatively lower at 14%, ROE is lower at 10% (FY24e) and loan growth
is higher. We factor in two raises in FY25 and FY27. We initiate coverage with a Buy rating and target
price of Rs100 based on 1.6x Jun-26e adj PB.
Exhibit 108 - IDFC First trades at reasonable valuations, given visibility of healthy growth, rising
profitability and better return ratios
3.5 Kotak
3.0
AU SFB ICICIBC
2.5
P/BV (x, FY25E)
HDFCB
2.0
Axis
Equitas IIB
1.5
IDFCF
1.0 FB Bandhan
RBL
0.5
0.0
6% 8% 10% 12% 14% 16% 18% 20%
RoE (%, FY25E)
.
Exhibit 109 - Indian private banks can deliver strong earnings growth over the next few years
EPS CAGR (FY24-26E)

68%
40%
29%
27%
26%
25%
30%
19%
18%
17%
14%
14%
20%
13%
11%
11%
10%
0%
FB
Axis
IIB
Yes
ICICIBC
IDFCF
AU SFB
Kotak
HDFCB
Bandhan
Equitas
Ujjivan
RBL
.
Source: Bloomberg. Company Data, Jefferies; Consensus estimates used for non-rated stocks
Exhibit 110 - IDFC First trades at a discount to large private banks Exhibit 111 - It also trades at a discount to other smaller banks
3 FY25 P/B (x) FY25 P/B (x)

4
2.3
2.1 2.2
2.9
2 1.8 3
1.7
1.5
2 1.7 1.7 1.7 1.7

1.5
1 1.2 1.2
1.0
1
0 0
IDFCF IIB Axis HDFCB Kotak ICICIBC RBL FB Bandhan IDFCF Yes Ujjivan Equitas IIB AU SFB
. .
Source: Bloomberg, Company Data, Jefferies Source: Bloomberg, Company Data, Jefferies

Equity Research
April 7, 2024
Exhibit 112 - IDFC First Bank - 1-yr fwd adjusted price-to-book trading history
(x) 1-yr adj P/B Forward Average

3.0
2.5
2.0
1.5
1.0
0.5
0.0
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
.
Exhibit 113 - On P/E basis, IDFC First trades higher than most of the large pvt. Exhibit 114 - And also trades at the higher end of the range vs. other mid-size
banks peers
FY25 P/E (x) FY25 P/E (x)

22 40
34
17
17 16 30
14 14
22
12 10 11 20 17
10 11 11
8 8 9
7 10
2 0
Axis IIB ICICIBC HDFCB Kotak IDFCF Bandhan Ujjivan FB RBL IIB Equitas IDFCF AU SFB Yes
. .
Source: Bloomberg, Company Data, Jefferies Source: Bloomberg, Company Data, Jefferies
Exhibit 115 - IDFC First Bank - 1-yr fwd price to earnings trading history
(x) 1-yr P/E Forward Average

30
20
10
0
Sep-22
Sep-23
Mar-22
Mar-23
Mar-24
.

Equity Research
April 7, 2024
Financials
Exhibit 116 - IDFC First Bank: Summary income statement

Rs mn FY23 FY24E FY25E FY26E FY27E
Interest Income 227,275 307,139 376,264 455,661 548,486
Interest expense 100,922 142,349 172,322 202,962 235,581
Net interest income 126,353 164,790 203,942 252,700 312,905
Other income 44,670 58,240 73,556 91,128 112,882
Fees 40,907 55,117 67,794 84,064 104,240
Treasury income 3,272 2,387 4,857 5,941 7,250
Other income 491 736 905 1,122 1,392
Total income 171,023 223,030 277,498 343,828 425,786
Operating expenses 121,704 161,161 196,670 233,138 275,422
Employee costs 37,422 48,649 58,379 69,471 81,976
Other costs 84,281 112,512 138,291 163,667 193,447
Pre-provision Profit 49,320 61,869 80,827 110,689 150,364
Total Provision 16,648 23,559 34,922 44,412 57,227
Loan loss provisions 26,724 23,559 34,922 44,412 57,227
Pre-tax profit 32,671 38,311 45,905 66,277 93,136
Provision for Tax 8,300 8,965 11,476 16,569 23,284
. Net profit 24,371 29,346 34,429 49,708 69,852
Exhibit 117 - IDFC First Bank: Summary balance sheet
FY23 FY24E FY25E FY26E FY27E
Equity Capital 66,181 70,694 74,030 74,030 80,141
Reserves & Surplus 191,030 251,281 330,910 380,818 499,759

Shareholders' funds 257,212 321,975 404,939 454,848 579,900
Deposits 1,446,373 1,971,644 2,629,509 3,373,507 4,142,382
Casa deposits 719,827 925,418 1,217,104 1,551,504 1,919,539
Term deposits 726,546 1,046,226 1,412,405 1,822,003 2,222,843
Borrowings 572,121 498,592 388,601 368,367 328,596
Other liabilities 123,711 125,000 143,750 161,000 180,320
Total Liabilities 2,399,417 2,917,212 3,566,799 4,357,721 5,231,198
Cash & bank balance 138,980 172,044 213,859 250,957 301,075

Investments 611,236 690,297 825,266 1,023,529 1,219,946
G-Secs 560,317 633,159 754,464 943,080 1,128,404
Loans 1,517,945 1,908,745 2,358,323 2,892,621 3,499,779
Fixed assets 20,901 26,127 31,352 36,055 40,381
Current assets 110,355 120,000 138,000 154,560 170,016
Total Assets 2,399,417 2,917,212 3,566,799 4,357,721 5,231,198
. Funded assets 1,605,990 1,967,778 2,418,792 2,951,654 3,571,203
Exhibit 118 - IDFC First Bank: Summary key ratios
EPS (Rs) 3.8 4.3 4.8 6.7 9.1
EPS growth (% YoY) 1570% 12% 11% 41% 35%
Profit growth (% YoY) 1575% 20% 17% 44% 41%
BV/share (Rs) 39 46 55 61 72
Adjusted BV / share (Rs) 36 43 52 58 69
ROAA (%) 1.1% 1.1% 1.1% 1.3% 1.5%
ROE (%) 11% 10% 10% 12% 14%
RORWA (%) 1.6% 1.5% 1.3% 1.6% 1.8%
NIM on AUM (%) 6.1% 6.3% 6.4% 6.4% 6.5%
Gross NPAs (% of loans) 2.5% 2.0% 2.0% 2.1% 2.1%
Net NPAs (% of loans) 0.9% 0.7% 0.7% 0.7% 0.7%
Coverage (% of gross NPA) 66% 67% 68% 68% 70%
Capital Adequacy Ratio (% of RWA) 16.8% 16.3% 16.4% 15.2% 15.8%
Tier I CAR (% of RWA) 14.2% 13.7% 14.0% 13.0% 13.8%
Fee growth (% YoY) 62% 35% 23% 24% 24%
Fee/ asset (% of avg assets) 1.9% 2.1% 2.1% 2.1% 2.2%
Fee (% total revenue) 24% 25% 24% 24% 24%
Cost-Income ratio (Excl Treasury) (%) 73% 73% 72% 69% 66%
Cost/ asset ratio (%) 5.7% 6.1% 6.1% 5.9% 5.7%
Funded assets growth (% YoY) 24% 23% 23% 22% 21%
Equity / assets (%) 11% 11% 11% 10% 11%
Equity / loans (%) 17% 17% 17% 16% 17%
Loan/deposit ratio (%) 105% 97% 90% 86% 84%
Loan provision/ avg. funded assets (%) 1.8% 1.3% 1.6% 1.7% 1.8%
CASA (% of deposits) 50% 47% 46% 46% 46%
CASA (% funds) 36% 37% 40% 41% 43%
Tax rates (% of PBT) 25% 23% 25% 25% 25%
Yield on loans (%) 14.2% 15.3% 15.2% 15.0% 14.9%
Yield on Investments (%) 6.1% 6.3% 6.3% 6.1% 6.0%
Cost of funds (%) 5.6% 6.3% 6.3% 6.0% 5.7%
PPP / share (Rs) 8 9 11 15 20
Dividend per share (Rs) 0.0 0.0 0.0 0.0 0.0
Dividend payout (% of PAT) 0% 0% 0% 0% 0%
Dividend yield (%) 0.0% 0.0% 0.0% 0.0% 0.0%
P/E (x) 21 19 17 12 9
P/ PPP (x) 10 9 7 5 4
P/BV (x) 2.0 1.7 1.5 1.3 1.1
. P/ABV (x) 2.2 1.8 1.5 1.4 1.2

Equity Research
April 7, 2024
Exhibit 119 - IDFC First Bank: DuPont Analysis

Interest income 10.6% 11.6% 11.6% 11.5% 11.4%
Interest expense 4.7% 5.4% 5.3% 5.1% 4.9%
Net interest income 5.9% 6.2% 6.3% 6.4% 6.5%
Other income 2.1% 2.2% 2.3% 2.3% 2.4%
of which treasury 0.2% 0.1% 0.1% 0.1% 0.2%
Total income (net) 8.0% 8.4% 8.6% 8.7% 8.9%
Operating expenses 5.7% 6.1% 6.1% 5.9% 5.7%
Operating profit 2.3% 2.3% 2.5% 2.8% 3.1%
Provisions 0.8% 0.9% 1.1% 1.1% 1.2%
of which NPLs and loans 1.2% 0.9% 1.1% 1.1% 1.2%
Pre-tax profit 1.5% 1.4% 1.4% 1.7% 1.9%
Tax 0.4% 0.3% 0.4% 0.4% 0.5%
Net profit/ ROA 1.1% 1.1% 1.1% 1.3% 1.5%
Leverage (avg asset/ equity) (x) 9.3 9.2 9.0 9.3 9.3
ROE 11% 10% 10% 12% 14%
. RORWA 1.6% 1.5% 1.3% 1.6% 1.8%
Exhibit 120 - IDFC First Bank: Price target
IDFC First Bank valuation, Jun-26 Rs/share

Adj BVPS 61
Target P/ABV multiple 1.6
Value of the Bank 99
Target price (rounded-off) 100
CMP 80
. Upside/(downside) 26%

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April 7, 2024
Appendix
Senior management and employee attrition/cost trends
Exhibit 121 - IDFC First has a strong leadership team with several people continuing from Capital First
.

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April 7, 2024
Exhibit 122 - Shareholding patern as of Dec'23
Shareholding Pattern
Other Corporate Trusts and Clearing
1% Members
President of India 0.3%
4%
Public Promoters
25% 37%
MF/Insurance/B
ank/FI/AIF
FDI/FPI/FC/FN/NRI
7%
26%
.
Exhibit 123 - Bank has tripled headcount between FY19 to FY23 as it is in an investment phase with
addition of branches, teams and products
Employee base (000s)

50
40 35
30 28
24
20
20
12
10
0
.
Exhibit 124 - IDFC First bucked the industry trend with a decline in attrition Exhibit 125 - Attrition ratio of IDFC First is lower than other smaller and mid-
ratio by 900bps YoY in FY23 size peers
Attrition rate (%) (%) Attrition Rate FY23(%)

60 51
50% 47 49
45% 46
39 40 41
45 35 35 36 36 38
33 34 34
31
40% 36%
33% 30
14
30% 15 7 7 9
20% 0
RBL
Older Private
IDFCF
City Union
ICICI
Total (Private)
AUSFB
SFB
Indusind
Ujjivan
Kotak
Axis
Uttkarsh
Bandhan
HDFCB
Large Private
Karur
Small Private
Federal
Equitas
10%
0%
FY21 FY22 FY23
. .

Equity Research
April 7, 2024
Exhibit 126 - On a YoY basis, IDFC First saw the highest improvement in attrition ratio with a decline of 9%
while most other banks saw an increase
(%) Change in Attrition Rate FY23 (ppt YoY)
25
14
15 9 9
5 5 6 6 7 7
2 3 3 4 4
5 0 1 1 1
-5 -2
-5
-15 -9
AUSFB
IIB
City Union
Total (Private)
SFB
ICICI
Older Private
RBL
IDFCF
Bandhan
Federal
Axis
Large Private
Equitas
Small Private
HDFCB
Karur
Karnataka
Ujjivan
Kotak
Uttkarsh
.
Exhibit 127 - Higher attrition at junior levels Exhibit 128 - Similar trends seen at industry level
Attrition rate (%) Segmentwise Attrition Rate FY23 (%)

FY21 FY22 FY23 50%
60% 51% 40% 35% 34%

45% 41% 40%
30%
33% 31%
30%
18% 19% 18% 20%
13% 12% 11% 13% 12%
15% 9%
10%
0%
Senior Mgt. Middle Mgt. Junior Mgt. A/c opening & junior 0%
sales staff Senior Management Middle Management Junior Management Total
. .
Source: Company Data, Jefferies Source: Company Data, Jefferies; Data based on HDFC bank and Kotak Bank
Exhibit 129 - ESOP grants less than 1% of outstandng shares over the past few Exhibit 130 - Comparison of ESOP grants as % of outstanding shares
years
Grants as % of total share - avg of last 3 years (%)
ESOP grants as % of O/S shares (%) 2.5%
2.1%
5% 2.0%
1.5%
4.0%
4% 1.5%
1.0% 0.7% 0.7%

3% 0.5% 0.5% 0.5%
0.4%
0.5% 0.2%
0.0% 0.0% 0.1%
2%
0.0%
0.9% 0.9%
ICICI
IDFCF
IIB
City Union
RBL
AUSFB
0.7%
Axis
Ujjivan
0.7%
Kotak
Bandhan
HDFCB
Federal
1%
0%
.
Exhibit 131 - However, extent of hike is coming down gradually Exhibit 132 - IDFC First is on the higher side of median hikes to employees as it
seeks to ramp up team, branches & products
Median hike in remuneration (%)
(%) Median salary hike (avg of last 3 years) (%)
15%
13% 15%
12% 12%
11% 11%
12% 11% 12% 10% 10% 10%
9% 9% 9% 9%
8% 8%
9% 7% 7%
8% 6% 7% 7%
9% 8%
6% 4%
3% 3%
6% 3%
0%
3%
ICICI
IDFCF
IIB
RBL
City Union
Total (Private)
Older Private
SFB
AUSFB
Axis
HDFCB
Uttkarsh
Karur
Large Private
Small Private
Kotak
Bandhan
Equitas
Ujjivan
Federal
0%
.
Source: Company Data, Jefferies .
ESG

Equity Research
April 7, 2024
Exhibit 133 - Bank has adopted several environmental and green initiatives
.
Exhibit 134 - Well defined committes and governance structure in place to support ESG activities
.

Equity Research
April 7, 2024
Company Description
IDFC First Bank
IDFC First Bank (formerly IDFC Bank) is an Indian private sector bank formed by the merger of the banking arm of Infrastructure Development
Finance Company (IDFC) and Capital First. The Bank’s strategy is to implant the erstwhile Capital First’s tried and tested model of financing small
entrepreneurs and consumers on a bank platform and build on IDFC Bank’s network, excellent technology stack, quality digital banking and strong
rural presence. The Bank is committed to building a customer-first culture, which guides its product and service design, and responsiveness
to customer needs.
Company Valuation/Risks
IDFC First Bank
We value IDFCF at Rs100, at 1.6x Jun-26E adjusted PB. Downside risks: Slower deposit growth leading to lower loan growth, higher opex and
higher slippages in the retail /corporate loan segment, driving higher credit costs.
Analyst Certification:
I, Prakhar Sharma, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and
subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this research report.
I, Vinayak Agarwal, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and
subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this research report.
Registration of non-US analysts: Prakhar Sharma is employed by Jefferies India Private Limited, a non-US affiliate of Jefferies LLC and is not registered/
qualified as a research analyst with FINRA. This analyst(s) may not be an associated person of Jefferies LLC, a FINRA member firm, and therefore may
not be subject to the FINRA Rule 2241 and restrictions on communications with a subject company, public appearances and trading securities held by
a research analyst.
Registration of non-US analysts: Vinayak Agarwal is employed by Jefferies India Private Limited, a non-US affiliate of Jefferies LLC and is not registered/
qualified as a research analyst with FINRA. This analyst(s) may not be an associated person of Jefferies LLC, a FINRA member firm, and therefore may
not be subject to the FINRA Rule 2241 and restrictions on communications with a subject company, public appearances and trading securities held by
a research analyst.
As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receives
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published at irregular intervals as appropriate in the analyst's judgement.
Investment Recommendation Record

(Article 3(1)e and Article 7 of MAR)
Recommendation Published April 5, 2024 , 04:46 ET.
Recommendation Distributed April 6, 2024 , 19:00 ET.
Company Specific Disclosures

Within the past 12 months, Jefferies Financial Group Inc., its affiliates or subsidiaries has received compensation from investment banking services from
IDFC First Bank Limited.
Jefferies Financial Group Inc., its affiliates or subsidiaries is acting as a manager or co-manager in the underwriting or placement of securities for IDFC
First Bank Limited or one of its affiliates.
Within the past twelve months, IDFC First Bank Limited has been a client of Jefferies Financial Group Inc., its affiliates or subsidiaries and investment
banking services are being or have been provided.
Jefferies Financial Group Inc., its affiliates or subsidiaries has acted as a manager or co-manager in the underwriting or placement of securities for IDFC
First Bank Limited or one of its affiliates within the past twelve months.
Jefferies International Ltd, its affiliates or subsidiaries has, or had, within the past 12 months an agreement to provide investment services to IDFC First
Bank Limited.
Explanation of Jefferies Ratings

Buy - Describes securities that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period.
Hold - Describes securities that we expect to provide a total return (price appreciation plus yield) of plus 15% or minus 10% within a 12-month period.
Underperform - Describes securities that we expect to provide a total return (price appreciation plus yield) of minus 10% or less within a 12-month period.

Equity Research
April 7, 2024
The expected total return (price appreciation plus yield) for Buy rated securities with an average security price consistently below $10 is 20% or more
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a 12-month period.
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over the next 12 months. The price targets are based on several methodologies, which may include, but are not restricted to, analyses of market risk,
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Risks which may impede the achievement of our Price Target

This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the financial
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Rating and Price Target History for: IDFC First Bank Limited (IDFCFB IN) as of 04-04-2024
120
100
80
60
40
20
Jul 21 Oct 21 Jan 22 Apr 22 Jul 22 Oct 22 Jan 23 Apr 23 Jul 23 Oct 23 Jan 24 Apr 24

Equity Research
April 7, 2024
Notes: Each box in the Rating and Price Target History chart above represents actions over the past three years in which an analyst initiated on a company,
made a change to a rating or price target of a company or discontinued coverage of a company.
Legend:
I: Initiating Coverage
D: Dropped Coverage
B: Buy
H: Hold
UP: Underperform
Distribution of Ratings IB Serv./Past12 Mos. JIL Mkt Serv./Past12 Mos.

Count Percent Count Percent Count Percent
BUY 1996 59.16% 352 17.64% 115 5.76%
HOLD 1216 36.04% 115 9.46% 22 1.81%

UNDERPERFORM 162 4.80% 3 1.85% 2 1.23%

Equity Research
April 7, 2024
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April 7, 2024
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India | Banks

Full Suite Banking Aids High Growth - Initiate INITIATING COVERAGE

with Buy RATING BUY

. FY22 FY23 FY24E FY25E FY26E FY27E

11% 10% 12%

. FY22 FY23 FY24E FY25E FY26E FY27E

(FY Mar) 2024E 2025E 2026E 2027E

Net Profit (B) 29.3 34.4 49.7 69.9

Please see important disclosure information on pages 43 - 48 of this report. 2

The Long View: IDFC First Bank

drive margin expansion 90

• Successful track record of managing retail asset quality across cycles 60

to control credit costs 50

Base Case, Upside Scenario, Downside Scenario,

Sustainability Matters Catalysts

Please see important disclosure information on pages 43 - 48 of this report. 3

Full suite banking & most improved deposit franchise

Exhibit 4 - IDFC First has significantly improved its funding profile

Funding profile (%)

Please see important disclosure information on pages 43 - 48 of this report. 4

We expect 28% Cagr in deposits aiding 22% in loans

LDR (%) Loan Mix (%)

10% 0.0% 0.0%

Please see important disclosure information on pages 43 - 48 of this report. 5

Cost/Income ratio (%, ex treasury) PPoP (core) as % of avg. assets (%)

Stress Test 2: 4.0%

Stress Test 3: 3.1%

FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Please see important disclosure information on pages 43 - 48 of this report. 6

Capital raise (Rsbn) CET-1 CAR (%)

P/BV (x, FY25E)

Please see important disclosure information on pages 43 - 48 of this report. 7

Full suite banking & most improved deposit

Exhibit 24 - IDFC First Bank's full suite banking platform

Please see important disclosure information on pages 43 - 48 of this report. 8

Exhibit 26 - IDFC First has significantly improved its funding profile

Funding profile (%)

Please see important disclosure information on pages 43 - 48 of this report. 9

YoY Growth in retail deposits (LCR) (%, 3QFY24)

30% 27% 27%

Deposits Deposit Growth YoY (%)

5,000 37% 36% 40%

53% 60% 200 7%

Please see important disclosure information on pages 43 - 48 of this report. 10

TD rates (%, 1-3 years)

Please see important disclosure information on pages 43 - 48 of this report. 11

Loans (Rsbn) YoY growth (%, RHS)

Segment wise loan CAGR (FY24-27E) (%)

Please see important disclosure information on pages 43 - 48 of this report. 12

Please see important disclosure information on pages 43 - 48 of this report. 13

Split of SME & Rural loans (%)

80% 39% 43%

SME loans (%, 3QFY24)

Please see important disclosure information on pages 43 - 48 of this report. 14

Retail finance (59% of loans) Retail loans are mostly in consumption

Please see important disclosure information on pages 43 - 48 of this report. 15

Retail Loans (Rsbn) Share in mix (%, RHS)

57% 59% 58% 58% 58% 58%

Split of Retail loans (%, 3QFY24)

YoY Growth in retail loans (%) Share in mix (%, RHS)

57% 58% 58% 58% 58%

Please see important disclosure information on pages 43 - 48 of this report. 16

Corporate loans (Rsbn) Share in mix (%, RHS)

Legacy infra loans (Rsbn) Share in mix (%, RHS)