IDFC FIRST BANK LTD.

Equity
Research
Reprt
Prepared By:
Rahul Gupta
Hridyansh Bhargava
Shashwat Prakash
 SELL

BSE CODE: 539437 NSE CODE: IDFCFIRSTB

BLOOMBERG CODE: IDFCFB:IN SENSEX: 67,221

CMP Rs. 93.5 TARGET Rs. 85 RETURN -9%

(12 Months Investment Period)

ABOUT IDFC FIRST BANK LTD.

IDFC FIRST Bank's vision is to build a world-class bank in India
that is guided by ethics, powered by technology, and a force
for social good. This vision emphasises the bank's
commitment to ethical practices, technological
advancement, and social responsibility.

1
UNIQUE INITIATIVES

Zero Fees for Essential Services

IDFC First Bank is the first and only bank in India to offer zero fees for 28
essential services on savings accounts, including ATM cash withdrawals, IMPS,
RTGS, NEFT, and more. This initiative provides cost savings for customers.

Monthly Credit on Savings Accounts

The bank is unique in offering monthly credit on savings accounts, allowing
customers to earn more from their deposits.

Innovative Credit Card Features

IDFC First Bank's credit cards come with features like lifetime free cards, never-
expiring rewards points, zero interest on cash withdrawals, and low APR, making
them stand out in the market.

TARGET SEGMENTS

Retail Focus
The bank primarily targets the retail market. While it continues to provide
corporate banking services, it has expanded into allied industries such as trade,
FX, cash management, and salary accounts. The focus is on serving various
consumer categories that drive the Indian economy.
2
MARKETING STRATEGIES
Social Media Marketing
The bank actively maintains social media profiles on platforms like LinkedIn,
Twitter, YouTube, Facebook, and Instagram. It engages with over 792k followers
on LinkedIn, sharing credit card details and promotions to attract and retain
customers.

SEO Strategies
IDFC First Bank's website ranks impressively with 3,67,487 organic keywords,
indicating a robust SEO strategy to maintain a strong online presence and
visibility.

Influencer Marketing
The bank collaborates with social celebrities to promote its brand and new
positioning, leveraging influencer marketing to connect with consumers.

Influencer Marketing
IDFC First Bank's net banking and mobile app facilitate online shopping, bill
payments, and financial transactions, offering convenience and security to
customers.

Content Marketing
The bank focuses on content marketing for lead generation and dissemination of
relevant material. They use blogs to express their outlook for the future

3
MANAGEMENT DISCUSSION AND ANALYSIS
SECTION OF COMPANY’S ANNUAL REPORT

POSITIVE FACTORS

Strong Growth in Bank Credit

This factor can significantly impact banking stocks positively. Robust credit
growth indicates increased lending activity, which translates into higher interest
income for the banks. As the bank lends more, its profitability tends to improve,
making it attractive to investors.

Stable Deposit Growth

Steady growth in deposits will provide a stable source of funding for the bank. It
will allow the bank to support its lending activities without relying heavily on
short-term borrowings. This stability will enhance overall profitability and
financial stability.

Surplus Liquidity
As the interbank liquidity conditions are in surplus, the bank can borrow at lower
costs. This will positively affect the net interest margin (NIM) and, consequently,
profitability.
.

Improved Asset Quality

A reduction in non-performing assets (NPAs) and a strong provision coverage
ratio demonstrate prudent lending practices and lower credit risk. This instills
confidence in investors and contributes to the bank's overall financial health.
.

4
Formalization of the Economy
The formalization of the economy, especially in terms of access to funding,
will help expand the customer base for the bank. This can lead to increased
lending opportunities and a broader range of financial products, ultimately
driving growth and revenue.

Profitability Growth
A growing trend in profitability, as indicated by increasing net interest
income, is generally seen as a positive factor for banking stocks. It reflects
the bank's ability to generate earnings from its core lending and investment
activities.

Digital Innovation
Investment in digital banking and payments initiatives positions banks for
the future and aligns with the ongoing trend towards digital banking
services. Such innovations can enhance customer experience, reduce
operational costs, and expand the bank's reach.

5
NEGATIVE FACTORS

Rising Interest Rates

An increase in interest rates can raise borrowing costs for the
bank, potentially reducing borrowing and lending activity. This
negatively impacts profitability and, consequently, the
attractiveness of the stocks.

Volatile Inflation
Inflation fluctuations can pose risks to the bank, affecting their
asset quality and profitability. High and volatile inflation can
erode the real value of loans and impact borrowers'
repayment capacity.

Depreciating INR
The depreciation of the Indian Rupee against the USD can
negatively affect bank, potentially leading to increased import
costs and inflationary pressures. This can, in turn, impact
borrowers' ability to repay loans and the overall financial health of
the bank.

6
Global Economic Uncertainty
Global economic uncertainties, such as those stemming from financial stability
risks in the US banking sector, can create market volatility. This can negatively
affect banking stocks, as it may lead to investor risk aversion and reduced market
confidence.

Taxation Changes
Changes in taxation related to insurance premiums and mutual funds can
influence investment decisions and potentially affect the financial products
offered by banks, impacting their fee income.

Tightening Credit Standards

The crisis in small US banks resulting in tighter credit standards can impact
lending conditions, potentially reducing credit growth and, consequently, banks'
profitability.

7
COMPANY’S FUNDAMENTALS AND
BUSINESS MODEL

IDFC First has been very aggressive in the retail segment. The bank aims to
be predominantly a retail bank. Although It has not entirely shifted its focus
from corporate banking, it has trade, forex, cash management, salary
accounts, treasury, and related businesses.

The main focus of the bank is to use Capital First’s tried and tested model of
financing small entrepreneurs and consumers on a bank platform (which is
IDFC bank). With IDFC’s strong branch network and rural presence, the
company aims to use the advantages offered by both these companies and
use them to expand in the retail segment.
I

DFC bank used to earn a spread of only 1.7% before the merger, Which has
seen a drastic turnaround, which can see an upside of up to 5-6% in the
future because of the retail segment business that came with Capital First.

Let us have a look at the product portfolio of IDFC First Bank:

8
COMPANY’S FUNDAMENTALS AND
BUSINESS MODEL

The bank also offers Working Capital Loans and Corporate

ILoans for Business Banking and Corporate Customers in India.
But majorly, it focuses on the retail segment.

While looking at banks, we need to analyze how the bank is

lending its money. The strategy for IDFC First is not to
increase the loan size but to change the product mix.

What is good?
1. Increasing retail deposits constantly which helps to
reduce the costs.
2. Reducing the infra and wholesale loans drastically and
increasing retail loans percentage.
3. Focusing on restructuring loans rather than increasing
them exponentially.
4. Advanced digital operational techniques help in
increasing operational efficiency and flexibility.

9
What is bad?
1. Wholesale loans of the bank are still high at 37%
2. High cost to income ratio due to the high operational expenses
3. Low fee-based income
4. ROA and ROE are not encouraging but are expected to grow.
5. The cost of liability for the bank stood at 8.35%, which is relatively
high.

What makes it different?

1. Advantage of Capital First’s retail presence and penetration
2. Tech-savvy Business Model

10
COMPETITORS AND MAJOR
SHAREHOLDERS

11
 SWOT ANALYSIS

SWOT analysis is a strategic planning and strategic

management technique used to help a person or
organization identify Strengths, Weaknesses,
Opportunities, and Threats related to business
competition or project planning.

12
STRENGTHS OF IDFC FIRST BANK

Healthy Customer Base

In 2021, IDFC First Bank had a customer base of around a whopping 7.3 million people and
has been growing ever since. It has also listened to its customers’ financial needs and built
strong relationships with them through one-on-one contact.

Broad Range of Portfolio

One biggest strength that IDFC First Bank has is that it offers a wide range of
financial and consulting services to its customers ranging from investment
banking, asset management, private banking and insurance, which give it an
edge over other competitors banks.

Talent Management
IDFC First Bank has a highly skilled workforce. This is due to their excellent
training and learning programs. Human resources are an integral part of the
success of IDFC First Bank in the consumer financial services industry.

13
Strong Brand Recognition
IDFC First Bank’s products and services are highly recognized in the
consumer financial services industry for the last 10+ years. This allowed the
company to charge a premium compared to its competitors in the consumer
financial services industry.

Government Support
In 2014, the Reserve Bank of India added the bank to its list of commercial
banks, reducing the cost of short-term funding and improving the ability of
banks to serve, further enhancing the bank’s growth prospects.

Limited Competitive Overlap

IDFC First Bank has little geographical overlap with other small financial
banks, limiting competition among existing players.

14
WEAKNESSES OF IDFC FIRST BANK

Declining Market Share

This is due to the consumer financial services industry growing at a faster rate
than the company. In such a scenario, IDFC First Bank needs to carefully analyse
various trends within the financial sector to understand what to do to drive future
growth.

High Cost to Replace Existing Professionals

Few employees are responsible for the knowledge base of IDFC First Bank, and
their replacement will take up a lot of time and money for the company

Rising Interest Risk

As the company is primarily wholesale-funded, rising interest rates can
negatively impact borrowing costs and thus profitability.

15
Easily Imitable Business Model
The Business Model of ICBC can be easily imitated by the competitors in the
industry name industry. To overcome these challenges company name needs
to build a platform model that can integrate suppliers, vendors, and end-
users.

Need to Invest More in New Technologies

According to the country’s scale of expansion and the geographical areas
IDFC First Bank needs to invest more funds in technology to coordinate the
processes across the board. Currently, the investment in technology is not on
par with the vision of the company.

16
OPPORTUNITIES FOR IDFC FIRST BANK

Advancements in Technology in the Banking Sector:

The banking industry has always functioned based on technology. IDFC First Bank
is known for its best-in-class user-friendly digital banking offerings. Thus, IDFC
First Bank should continue to adopt the latest technological advances. To draw
future generations, they should focus on putting out newer banking and financial
service using digital marketing skills.

Growth Potential

IDFC First Bank operates in under-penetrated sectors such as vehicle

finance, MSME and small enterprise finances which offers it strong growth
potential.

Product Growth Potential

The bank is yet to launch several other major lending banking products and
hence has greater growth potential.

17
Expanding the Customer Base in Upper Segments
As customers must move from unorganised operators in the banking sector to
licensed players, IDFC First Bank has the opportunity to enter the entry-level
market.

Global Opportunities for IDFC First Bank

A major opportunity for financial service players in the Indian market is the global
banking market, it is inarguably that the global market is worth billions of dollars.
IDFC First Bank is mainly focused on the Indian market, which needs to increase
its reach outside the Indian market as well making it gain more customers.

18
THREATS TO IDFC FIRST BANK

Price to Book value ratio:

Given the high turnover rate of employees and the increasing reliance on
innovative solutions, IDFC First Bank may face challenges in this sector soon

Dynamic Competition

New technologies developed by competitors and the market can pose a

serious threat to the industry in the medium to long term. The competition is
expected to intensify, especially in the area of liabilities, as the target profile
of customers of new banks is similar to that of the existing banks.

Retention of Key Management Personnel

Developing and retaining key executives can be difficult as multiple new banks,
fintech companies, and existing banks are competing for the same talent pool.

19
Increased Marketing Efforts:

Due to the rise of digital marketing, there is an increasing number of

promotional messages which are being sent by competitors. It clutters up the
space, which leads to losing out on customers. IDFC First Bank is well versed
and trying to adopt a variety of the latest digital marketing skills to get
ahead of the competition. You must also check out these skills to achieve the
same.

20
 QUANTITATIVE
ANALYSIS
50

40

30

20

10

0
2022 2023 2024 2025 2026

We have divided Quantitative Analysis into 3 parts:

1] Financial Statements analysis
2] Shareholder pattern Analysis
3] Financial Ratio analysis

Credits:
1]Data has been taken from Screener.com, Moneycontrol,
Simplywallstreet.com to make the Plots.
2] If not mentioned source data is taken from IDFC First Bank Annual
Report

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 FINANCIAL STATEMENT
ANALYSIS
1] Profit/Loss Statement:
The revenue made has jumped in the past fiscal year, with not that great a growth in
expenses, the operating expenses as well as interest expenditure expenditure have
increased, this suggests that IDFC First was able to make more profit by expanding.
The above is also indicated by increase in rent and the money paid to employees as
indicated by the note
Consequent to the above the Consolidated profit ( Income-Expenses) has also gone
up
Despite the above, IDFC is not ideal for long term investments as shown by the
fluctuation below, the fall in 2020 could be attributed to the covid factor however, it
does not explain the fall in profits in 2019 and 2022, therefore covid cannot be
considered a factor in this.
The quarterly profits are positive except for a steep decline in the jun-2021 quarter,
however the curve suggests a little volatility which could be a risk factor to this stock.
Earnings include another income of Rs.4,975 (th) Cr, this is another factor as the bank
does not make a large chunk of profit from its primary function.

22
 Return on Equity:

Observations:
1] ROE Ratio of IDFC FIRST rose handsomely by 1431.85 % this year.
2] ROE Ratio with value of 9.61 was highest in Year Mar-23 in the last Five Years.
3] ROE Ratio with value of -18.46 was lowest in Year Mar-20 in the last Five
Years.
4] Latest ROE Ratio with value of 9.61 is Greater than Average ROE of -3.20 in
the last five years.

Points To Note:
1. ROE Improvement:
IDFC FIRST Bank has seen a remarkable 1431.85% increase in its Return on Equity (ROE) this
year, signalling substantial progress in profitability compared to the previous year.

2. Historical Fluctuations:
While the bank has recovered from losses in 2019 and 2020, its historical ROE fluctuations
may raise concerns among investors regarding stability and risk.

23
3.Profit Growth Impact:
The recent ROE rise is likely driven by increased profits, but investors should assess the
sustainability of this growth and understand the factors behind the bank's historical volatility
before making investment decisions

Conclusion:
The graph of Return on equity has been of a fluctuating nature, whilst the bank seems to
have recovered from losses in 2019 and 2020, and there has been a good growth, the
fluctuation is a sign of volatility for potential investors and could serve as a red flag.
However, as we have already seen the profits have increased in the last FY, therefore
we see a rise in Return On Equity.

Return on Equity:

The Earnings per share is a general indicator of what proportion of the company’s
earning is going per share to the investors, the graph for this is more or less same as of
the return on Equity ratio. This indicates that there has been no significant increase in
equity raised in recent times.

Therefore it will more or less resemble the observations and conclusions drawn from
ROE .

Retention ratio:
IDFC has had a constant retention ratio of 100% for many years now, meaning it has
focussed to keep all profits for investing in the firm only.

24
Price to Book value ratio
In the graph shown the blue line represents the Book value for IDFC First bank
and the red line represents P-B ratio.

The book value has fallen through 2019-2021, where we have established the
bank suffered losses, however there has been recovery in it to some extent.

The P-B ratio despite the increase in book value has remained more or less
constant in the past 3-5 years which means the price of the stock has also gone
up along with this, this means buyers have regained some confidence in the bank
in recent times.Hence, this is a good sign. The P-B ratio of 1-1.5 does not indicate
any overvaluation as such, further analysis could be made when compared to
peers.

25
Current Ratio
As indicated by the the Image attached(Source: Topstockresearch.com),
the current ratio (assets-liabilities) has had a sudden increase since FY
2022, and as the assets have remained more or less constant, the increase
could be associated with increased liabilities, which is a red flag as
increased liabilities put burden on the company’s financials. This may be
due to an increase in borrowing.

Due to a decline there’s also a loss of liquidity to peers.

Debt to Equity Ratio

1] The highest debt to equity ratio was recorded in March 2019 (5.81)
indicated that the company had relatively high debt levels at that
time.

26
2] Since then, the bank has made efforts to bring down its leverage, which is a
prudent move as it reduces interest expenses and financial vulnerability,
especially in volatile economic conditions. The graph also indicated Debt to
Equity Ratio of IDFC FIRST trending down for at least three Years.

3] Debt to Equity Ratio of IDFC FIRST Bank has fallen by -11.89 % Compared to
the previous Financial Year.

4] Latest Debt to Equity Ratio with value of 2.21 is lower than Average Debt to
Equity of 3.36 in the last five years.

Conclusion:
All this indicates is that the debt has decreased considerably in the past few
years, this means that the company has been able to repay some of its debt and
consequently has bettered its financial health. The reducing debt to equity ratio
also means that the bank has been less reliant on debt funding, which is again a
positive.

27
 EV/ EBITDA

This Bar graph shows the EV/EBITDA ratio tells us about the compares a company’s
enterprise value to its earnings before interest, taxes, depreciation, and amortisation,
Following could be possible conclusions we can draw from this:

1] EBITDA represents earnings before tax-interest-depreciation, whilst the EV is the

amount of money a company would have to pay if it were to buy IDFC First, so basically if
the ratio has decreased, it would mean that the debt has gone down, meaning the
company has been able to pay off its debt successfully.. This is a positive for IDFC as over
the years it has repaid its debt thus improving its Financial Health.

2] Enterprise value (EV) is decreasing, which means that the market is losing confidence
in the company’s future prospects and growth potential. This could be due to poor
financial performance, negative news, competitive pressure, or other factors that affect
the company’s valuation. This is a negative sign for the company and its shareholders, as
it indicates that the company is losing value and may be undervalued by the market.

3] EBITDA is increasing, which means that the company is improving its operating
performance and profitability. This could be due to higher revenue, lower expenses,
better efficiency, or other factors that affect the company’s earnings. This is a positive
sign for the company and its shareholders, as it indicates that the company is generating
more cash flow and may be undervalued by the market.
28
Conclusion:
Here, as the stock prices have actually gone up, the 2nd point doesn’t seem to be
that valid, therefore we can conclude that EBITDA is increasing, meaning the
company is generating higher revenue, which follows our previous analysis in which
profits have increased.

Net NPA and ROA

The below is the data for NPA (non-performing assets) and ROA(Return on assets):

The NPA has increased through the years, this could have the following implications:

1.Financial Strain and liquidity issues: An increase in Non-Performing Assets

(NPAs) can lead to financial losses, erode asset quality, reduce lending
capacity, and potentially trigger liquidity issues, impacting the company's
profitability and growth prospects.

2.Reputation and Regulatory Risks: Rising NPAs can harm a company's

reputation, trigger credit rating downgrades, and attract regulatory scrutiny,
potentially leading to operational distractions and long-term damage to trust
among customers and investors.

The ROA has decreased, this implies that IDFC FIrst bank has been unable to
get/gain profits effectively from its assets, which is not a positive sign.

However, the deviation in the two isn't that severe, that it would play a big
role, but the points do seem to be worth noting.

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 P-E Ratio
The following is the P-E ratio for past 4 years of IDFC First”s financials:

There seems to be a huge spike 2022, which may indicate the stock was highly
overvalued at the time, the price of the stock increased nearly 33% from 2021 to
2022, this could be a potential reason, however, this is not all as for the P/E ratio
to almost triple this has to mean reduced earnings per share, therefore this may be
a time when EPS took a major hit. Making the stock definitely overvalued

However, P/E ratio was received in march 2023, now this may also be due to
following factors:
1] The people lost confidence in the stock as it was highly overvalued before and
therefore the stock price took a hit
2] The EPS of the company improved significantly, thereby improving its valuation,
making the stock significantly less overpriced as compared to before.

As we can see in the stock prices graph the prices have been consistently
increasing since this year, so the first reason can be eliminated.

Therefore, the second point is a big positive for the stock.

However, the above analysis also adds up to the volatility of the IDFC First bank
stock, which is overall a negative.

30
 FINANCIAL STATEMENT
ANALYSIS
2] Balance Sheet Statement:
The money at short notice available stands at 28,490,045, however borrowings are
from sources other than RBI, stand at 562,120,920, which is a number much higher
than the reserves, now according to data from Screener at bottom of the page
Most of the borrowing is not long term, in fact the number has reduced to about 0,
with a really less amount for reserves as can be observed.
This puts IDFC First at a disadvantage and vulnerable to Sudden unfavorable changes
in environment as observed in Jun 2021 quarter when profit fell a lot, that was the
time of resurgence of the deadliest covid waves in India
By above we can conclude that IDFC’s financial health is not that good, another red
flag for long term investing
Contingent liabilities of Rs.3,63,404 Cr, this is a red flag as Contingent liabilities are
likely to cause a company's stock price to drop. This is due to the fact that such
liabilities put the company's future ability to make profits at risk.
 FINANCIAL STATEMENT
ANALYSIS
3] Cash-Flow Statement:
The Cash flow statement indicates a major investment in FY 2023 as we see a very
sharp increase in cash from investing activity, this could mean that IDFC has invested
in itself to grow and expand business, which is in line with our first conclusion that we
had drawn from the P-L statement too.
The company has also had influx of money from financing activity, this in all likelihood
indicates that the company has borrowed money for investing in itself, we can come
to this conclusion because the cash from operating activity is much less that what's
being used to invest, now this is again a risk following is an analysis:

Assuming that the money is borrowed, we can assume an interest rate of about 10%:
That means 650 Th Cr from the 35,563 Th Cr generated is being used to pay off interests,
meaning about 20% of the Money is used up in interests.
Another major concern is the operating cash is constantly declining, this means that the
ability to generate cash from business has considerably reduced, however profits have
grown in this time, this is unexplained. There’s also the volatility that's associated with the
operating activity.

32
 SHAREHOLDING PATTERN
ANALYSIS
The promoters of the business have not reduced their equity since Sep 2021, which
was right after the June 2021 quarter where they reported a massive loss, however
they seem to have bought their equity back, this means they believe in IDFC First
Bank’s performance, which as promoters they’ll be fully aware of, hence, this is a good
sign
However the Mutual Funds and the insurance companies as indicated by DIIs have
reduced their share, this might be a possible negative as mutual funds and insurance
companies have chosen to move away
FIIs on the other hand has increased, but this is due to acquisition of about 5.1 crore
equity shares of IDFC First Bank Ltd by GQG Partners, in a ₹479.50-crore block deal
transaction, due to their increasing stakes, we find a high FII shareholding. The fact
that foreign groups are looking to acquire a stake in IDFC First bank, it is a good sign
such groups look to invest in IDFC first.

Dividend Analysis:
IDFC bank First is reporting profits but is not paying any dividends, following could be a reason

1. Reinvestment in Growth:
One reason may be that the company will re-invest the money within itself. Here IDFC first bank
seems to be doing the same as we observed in the financial statements, under the investment
section. Hence, an investment could be beneficial as we’ve established the promoter has confidence
and now the company is looking to expand

2. Debt Repayment:
Instead of distributing profits to shareholders, IDFC First bank seems to use its earnings to pay down
the debt, therefore the dividend part seems reasonable.

33
Following is an Image for valuation as done by deloitte, while the
Merger talks of IDFC First and IDFC was happening:

This Shows the Asset Approach valuation of IDFC First is 38.9 and by
comparable companies method is 70.2, both of which are much lower
than the Current stock price of 93.50 [as of 12th sept 2023], hence this
can be considered to be overvalued, here's a link to that
report:https://www.idfcfirstbank.com/content/dam/idfcfirstbank/pdf/in
vestors/Joint-Valuation-Report-Harsh-Ruparelia-Deloitte-SSPA.pdf

( Source: internet )

35
 This analysis shows that the stock is currently trading at a price to book
value ratio much higher than the median for the year, this is a clear sign
of overvaluation

DCF Analysis(Taken From Simply Wall street):

Based on this also, we can conclude that the IDFC Stock is overvalued

Conclusions Drawn:
The stock has a high growth potential, as its earnings are forecast to grow by 24.46%
per year and its earnings grew by 120.5% over the past year. This indicates that the
company is profitable and expanding its business.

However, the stock is also expensive, as its price to earnings ratio (P/E) is 22.8x, which is
higher than the peer average of 14x and the estimated fair P/E of 14.3x. This means that
the market is paying a premium for the company’s future growth prospects. This is also
an indicator of market trust.

36
 The stock is also trading above the fair value estimate of ₹36.34, which is based on a
discounted cash flow analysis. This means that the stock is overvalued and may not
offer a good return on investment.

The stock also has some risks, as its shareholders have been diluted in the past year.
This means that the company has issued more shares to raise capital, which reduces
the earnings per share and the ownership stake of existing shareholders.

The image attached shows the price to book ratio (P/B) of the stock over the past year,
which is another measure of market value relative to book value. The P/B ratio has
been increasing steadily over the year, reaching a peak of 2.75 on 14 Jul 2021. This
means that the market value of the company is much higher than its book value, which
could be a sign of overvaluation or intangible assets.

The image also shows that the P/B ratio of the stock is consistently above the median
P/B ratio of its peers, which is around 1.5. This means that the stock is more expensive
than its competitors based on this metric.

Analyst Target Price: The fact that the target price is lower than the current share price,
combined with the high P/E ratio, may imply that analysts believe the stock is
overvalued and could experience a correction.

In short the IDFC stock is overvalued, however may have a potential for growth but
the analysis on this reveals that investment has a large risk factor.

37
PEER ANALYSIS
Following is a comparison of IDFC First Bank with its peers, for testing its
ratios against the industry averages and competitors:

Source: Screener

1] First of all we notice that out of all its competitors listed here IDFC fIRST as its an
emerging bank has the lowest market cap value

2] However when we compare it with IDBI bank, we find IDBI bank pays dividends to its
investors, and both banks have similar market cap, this maybe a negative point as it
points to better financial health of IDBI bank as compared to IDFC, IDBI also has a lower
P/E, meaning it is better valued(as both have comparable market cap).
This suggests currently IDFC bank falls short in comparison to IDBI bank

3] IDFC bank has a higher P/E than almost all of its competitors listed here, this could be
because of overvaluation.

4] However IDFC Bank has had higher YOY quarter growth than any of its competitors
which is a major positive and a possible reason for its bullish run in the market recently.

5] It’s also having a higher than median growth in sales, however this is not the highest
quarterly profits as we had established earlier that IDFC First has a good chunk of
revenue from other income as well .

Therefore IDFC First has the best growth amongst its peers, though it may be overvalued.

38
TECHNICAL ANALYSIS
Following is a candlestick chart of the IDFC First Bank limited:

Source: Screener

The candlestick chart for the stock indicates the initiation of an uptrend from
May 2023 as the Lowest low of any pull back does not cross the lowest low of any
previous pull-back. This is also called a bullish run and has led to IDFC First Banks
share’s highest price in the previous 5 years.

The Sma50 and SMA 200 (Simply moving Average in a period of 50 and 200)
line is indicated in the blue, it's a tool for establishing a trend, in this case it shows
an uptrend with no immediate signs of a reversal.

The decline in prices in the last few days could be considered as a pullback.

So, technical analysis would lead us to buy, however since this is a bullish run, the
risk factor is high in this.

40
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