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Hidden Gem: IDFC First Bank (CMP - ₹82, Mcap - ₹70,931 crore, Target - ₹100, Buy)

ICICIdirect Research 16 Jan 2026 DISCLAIMER

Formed by merger of erstwhile IDFC and Capital First in 2018, IDFC First Bank is private sector bank with retailization of business being a key focus area (retail segment forming ~59% of funded assets).
The ₹7,500 crore, CCPS issuance has strengthened capital position, with CRAR at ~16.8% and Tier-1 at ~14.8%, providing ample headroom to sustain business momentum, including high-growth segments such as retail lending, credit cards and wealth management without near-term capital constraint. Supported by strong deposit momentum, an improving funding mix and adequate capital buffer, we expect the bank to deliver ~20% CAGR in advances over FY25–28E.
Post volatility in margins in 1HFY26, expect gradual recovery from H2FY26 with exit NIM guided at ~5.8% by FY26, supported by CRR benefits and calibration of term deposit rates, though recent 25 bps repo rate cut could result in near term volatility. Gradual recovery in disbursement in high yielding MFI segment (amid normalization of asset quality) and provision to revise SA rates remains a key medium-term margin lever.
With incremental stress from MFI and credit card showing a declining trend, management expects asset quality to improve in H2FY26, alongside moderation in credit cost, which are guided to remain in the 2.05–2.1% range.
Post balance sheet restructuring, now the focus is shifting towards sustaining growth along with improvement in operational efficiency to achieve uptick in RoA. Continued higher accretion of liabilities and moderation in opex growth relative to top-line remains key. Near term margin and credit cost volatility could not be ruled out, though management remains confident of streamlining the trend. Thus, we remain positive on the stock.

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