- IDFC Ltd holds 53% of IDFC bank, a stake today worth Rs.70 billion.
- IDFC Bank itself is deeply undervalued, trading at below book value (0.9x) and is in the process of a merger with a retail financial institution, First capital Ltd.
- IDFC ltd is in the process of disposing of its Asset management and securities business, for which it should receive at least Rs.60 billion (Rs.40 billion for the AMC and Rs.20 billion for the securities business)
Thus immediate value of Rs.60 billion will be recognised in the coming 4-6 months. IDFC Ltd market cap is currently Rs.80 billion, which means that its break up value at the very least is Rs. 130 billion (Bank Rs.70 bn, AMC and securities Rs.60 bn) not counting other assets such as the alternative asset management business, land etc. Thus we believe a discount of at least 60% exits, which we believe will be realised in the coming months. Post merger with First Capital, we believe IDFC Bank will also be revalued higher.
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Photo: Siddharth Mehta-Thomas