IDFC First Bank Share Price Target at Rs 87: Axis Securities
Axis Securities has reiterated its BUY call on IDFC First Bank Ltd., albeit with a moderated target price of Rs 87, following a fraud incident at its Chandigarh branch that is expected to weigh on near-term profitability but not structurally impair the bank's operations and long term growth plans. IDFC First Bank faces a near-term earnings dent after identifying a cheque-related fraud exposure of approximately Rs 590 Cr at its Chandigarh branch. While the incident may shave nearly 28% off FY26E pre-impact earnings and modestly dent Tier I capital by 16 bps, the issue appears localized. Importantly, the bank’s retail deposit franchise remains resilient, asset quality stable, and growth momentum intact. Axis Securities has trimmed FY26 earnings estimates by 23% but broadly maintained FY27–FY28 projections, underscoring confidence in the core operating trajectory. With valuations at 1.2x–1.1x FY27–28E ABV, the brokerage sees 24% upside from current levels.
The Fraud Event: Scope, Exposure and Immediate Fallout
Exposure quantified at Rs 590 Cr. The fraud surfaced after the Government of Haryana sought reconciliation and transfer of balances. A mismatch led to identification of Rs 490 Cr exposure, with an additional Rs 100 Cr conservatively recognized.
Operational lapse, not systemic breakdown. The incident was cheque-related and confined to specific government-linked accounts within a single branch. It was neither cyber nor technology-driven.
Immediate administrative response. The bank has suspended involved branch employees, filed police complaints, and appointed KPMG as forensic auditor. The audit is expected within 4–5 weeks.
Government de-empanelment risk. Haryana has de-empanelled the bank for government business. However, no other state government has raised concerns so far.
Financial Impact: Earnings Compression but Capital Cushion Intact
The entire fraud amount is assumed to flow through Q4 earnings.
~28% hit to FY26E earnings. Pre-impact FY26 PAT stood projected at Rs 2,107 Cr; revised estimate now stands at Rs 1,621 Cr.
Tier I capital erosion limited to ~16 bps. Given a Tier I ratio projected at 14.9% in FY26E, the bank retains adequate capital buffers.
Insurance buffer available. The bank holds employee dishonesty insurance of Rs 35 Cr, partially offsetting losses.
Deposit impact manageable. Haryana government deposits constitute merely 0.5% of total deposits. Overall government-linked deposits stand at 8–10%, aligned with industry averages.
Earnings Revisions: A Tactical Reset, Not Structural Downgrade
Below is the revised earnings matrix:
| Metric (Rs Cr) | FY26E (Revised) | FY27E | FY28E |
|---|---|---|---|
| Net Interest Income | 21,345 | 26,489 | 31,857 |
| PPOP | 8,507 | 12,075 | 15,875 |
| Net Profit | 1,621 | 4,543 | 6,602 |
| EPS (Rs) | 1.9 | 5.3 | 5.7 |
| Adj. Book Value (Rs) | 53.6 | 58.7 | 66.0 |
FY26 PAT cut by 23%. However, FY27–28 adjustments are marginal (-0.6% and -0.4%), indicating confidence in forward earnings normalization.
Core Business Strength: Retail Franchise Continues to Fire
Despite the headline risk, operational metrics remain compelling:
Loan growth sustained at ~21% CAGR. Loans projected to rise from Rs 2,83,754 Cr in FY26E to Rs 4,15,841 Cr in FY28E.
Deposit growth at 23–25% trajectory. Retail-driven granular deposits remain the growth backbone.
Improving cost ratios. Cost-to-income ratio expected to improve from 71.6% in FY26E to 63.4% by FY28E.
Asset quality steady. Net NPL projected at 0.4–0.5%, with coverage ratio steady at ~72.5%.
Profitability Recovery Path
Return ratios reflect a meaningful normalization post FY26:
| Metric | FY26E | FY27E | FY28E |
|---|---|---|---|
| RoA (%) | 0.4 | 1.0 | 1.2 |
| RoE (%) | 3.7 | 9.0 | 11.7 |
| P/ABV (x) | 1.3 | 1.2 | 1.1 |
RoA expected to rebound to 1–1.2% by FY28E.
RoE recovery to 9–12% range.
The inflection hinges on disciplined provisioning, cost moderation, and sustained deposit growth ahead of system levels.
Valuation Thesis: Re-rating Conditional on Governance Reinforcement
Axis Securities values the stock at 1.4x Sep’28E ABV (earlier 1.6x), implying a target price of Rs 87, versus current market price of Rs 70.
Upside potential: 24%.
Valuation comfort zone: 1.2x–1.1x FY27–28E ABV.
A sustained re-rating will depend on:
• Seamless completion of forensic audit
• Reinforced internal control architecture
• Continued deposit market share gains
• No cascading regulatory repercussions
Risk Monitor Dashboard
Investors should monitor:
• Elevated cost-income ratio trends
• Any slowdown in unsecured retail or credit card growth
• Asset quality deterioration
• Additional government account scrutiny
A slowdown in systemic credit growth could further compress earnings visibility.
Market Performance Context
The stock has corrected meaningfully from its recent high of Rs 87 to Rs 70, reflecting sentiment compression post incident. Historically, brokerage stance has oscillated between HOLD and BUY, with the most recent recommendation reinstating BUY at moderated target levels.
Investment Conclusion
IDFC First Bank is navigating a governance setback rather than a balance sheet crisis. The fraud impact, while material in FY26, appears financially containable. The retail-led deposit franchise remains robust, asset quality metrics stable, and profitability recovery visible from FY27 onward.
At current valuations near 1.2x forward ABV, the stock offers asymmetric risk-reward provided no additional governance shocks emerge. Investors with a 12–18 month horizon may consider accumulation, factoring in near-term volatility.
Recommendation: BUY | Target Price: Rs 87 | Upside: 24%
