Idfcbank Gs 011215

November 30, 2015
ACTION
Sell
IDFC Bank Ltd (IDFB.BO)
Return Potential: (7%)
Equity Research
Value creation to take time; better return potential elsewhere; initiate Sell
Source of opportunity
Investment Profile
We initiate IDFC Bank (IDFB) at Sell with a 12-month SOTP-based target price
of Rs57. IDFC Limited recently demerged its lending business into a banking
entity to benefit from possible diversification of its loan book/revenues and
develop its retail franchise, despite high regulatory costs. However, the
business strategy appears mixed and is unlikely to lead to a strong retail build
out (low cost deposits, high-yielding retail loan book) in the near-to-medium
term, which could have otherwise, partially offset the high regulatory cost,
in our view. As a result, we expect IDFB to deliver below median ROAs by
FY21E and lower headline loan growth vs. other private (PVT) banks.
Low
High
Growth
Growth
Returns *
Returns *
Catalyst
Multiple
Volatility
Volatility
20th
Percentile
40th
60th
80th
100th

Asia Pacific Banks Peer Group Average
* Returns = Return on Capital
For a complete description of the investment

profile measures please refer to the
disclosure section of this document.
Key data
We see IDFB as a laggard, over its first five years of operations, amongst the
PVT banks on multiple counts: (1) Subdued operating metrics as we
forecast its ROA to take at least five years to reach 1.5%, below median
levels of 1.9%; (2) lower headline loan growth than peers over
FY17E/FY18E even though we expect growth in non-infrastructure loans to
grow fairly strong; (3) tepid build out of granular liability franchise which
could have otherwise helped partially negate the impact of high regulatory
costs (cash reserve ratio, statutory lending ratio and priority sector lending);
(4) unfavorable risk reward with IDFB trading at 1.5X 12-month forward
book, +28%/-22%/-27% vs. the valuations of ICBK/AXBK/YES, which have
lower execution risks; and (5) lack of support from technical factors such
as the relaxation of foreign ownership (FII) limits thereby creating ample FII
room for other PVT banks (27%-41%) vs. IDFB (25%).
Valuation
We value IDFB at 1.4X 12-month forward banking book, while it is trading at
1.5X 12-month forward book. Our target price also includes the value of
existing private equity and project equity funds (Rs5) as the investment in
these funds remains part of the banking book.
Sharp uptick in macro, strong loan growth, faster recovery from stressed
loans, and better strategy on retail thereby improving revenue streams.
Current
Price (Rs)
12 month price target (Rs)
Market cap (Rs mn / US$ mn)
Foreign ownership (%)
EPS (Rs)
EPS growth (%)
P/B (X)
P/E (X)
Dividend yield (%)
P/PPOP (X)
PPOP growth (%)
Preprovision ROA (%)
Credit cost (%)
ROA (%)
ROE (%)
61.00
57.00
206,883.5 / 3,100.0
--------------
3/16E
(1.72)
-1.5
NM
0.0
8.9
-NM
NM
NM
NM
3/17E
2.76
260.1
1.4
22.1
0.9
13.7
(34.8)
1.7
NM
1.04
6.7
3/18E
3.38
22.4
1.4
18.1
1.1
11.0
24.9
1.9
NM
1.13
7.7
Price performance chart

72
27,500
70
27,000
68
26,500
66
26,000
64
25,500
62
25,000
60
Aug-15
Key risks
INVESTMENT LIST MEMBERSHIP

Asia Pacific Sell List
Multiple
24,500
Sep-15
IDFC Bank Ltd (L)
Share price performance (%)

Absolute
Rel. to India BSE30 Sensex
Oct-15
India BSE30 Sensex (R)
3 month
---
6 month 12 month
-----
Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 11/27/2015 close.
Coverage View: Neutral

Rahul Jain
+91(22)6616-9161 rahul.m.jain@gs.com Goldman Sachs India SPL
Tabassum Inamdar, CFA
+91(22)6616-9052 tabassum.inamdar@gs.com Goldman Sachs India SPL
Mayank Bukrediwala
+91(22)6616-9169 mayank.bukrediwala@gs.com Goldman Sachs India SPL
The Goldman Sachs Group, Inc.
Goldman Sachs does and seeks to do business with companies

covered in its research reports. As a result, investors should be
aware that the firm may have a conflict of interest that could
affect the objectivity of this report. Investors should consider
this report as only a single factor in making their investment
decision. For Reg AC certification and other important
disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by nonUS affiliates are not registered/qualified as research analysts
with FINRA in the U.S.
Global Investment Research
November 30, 2015
IDFC Bank Ltd: Summary Financials

Profit model (Rs mn)
--
3/16E
3/17E
3/18E
Net interest income

Non-interest income
Operating revenue
Non-interest expense
Preprovision operating profit
Total provision charge
Associates
Pretax profit
Tax
Minorities
Net profit
------------
22,804.1
11,031.2
33,835.3
(10,654.4)
23,180.9
(4,919.4)
0.0
(8,125.5)
2,275.1
-(5,850.3)
16,075.2
14,366.0
30,441.2
(15,323.1)
15,118.1
(930.9)
0.0
14,187.2
(4,823.7)
-9,363.6
19,464.7
16,276.1
35,740.8
(16,860.6)
18,880.2
(1,516.1)
0.0
17,364.1
(5,903.8)
-11,460.3
Dividends
Dividends payout (%)
---
0.0
0.0
1,872.7
20.0
2,292.1
20.0
Earnings growth drivers (%)

Net interest margin
Provision charge/total loans
YoY Growth (%)
Customer deposits
Loans
Net interest income
Fee income
Non-interest income
Operating revenue
Operating expenses
Provision charges
Pretax profit
Net profit
EPS
DPS
----
3/16E
-1.00
3/17E
1.93
0.17
3/18E
2.05
0.23
--------------
--------------
-15.0
(29.5)
133.7
30.2
(10.0)
(43.8)
(34.8)
(80.1)
274.6
260.1
260.1
--
727.0
18.3
21.1
42.7
13.3
17.4
(10.0)
24.9
62.9
22.4
22.4
22.4
22.4
Market dimensions
No of branches
No of staff (000)
Revenues/staff (US$)
Net profit/staff (US$)
------
3/16E
55.0
1.4
381,100.4
(65,894.7)
3/17E
140.0
2.9
155,150.2
47,723.6
3/18E
265.0
4.5
118,879.7
38,118.8
DuPont analysis (%)

ROE
x leverage
=ROA
-----
3/16E
NM
NM
NM
3/17E
6.7
15.6
1.04
3/18E
7.7
14.6
1.13
% of assets
Net interest income
Fee income
Non-interest income
Operating revenue
Operating expenses
Loan loss provisions
Pretax profits
Taxes
-----------
3/16E
NM
NM
NM
NM
NM
NM
NM
NM
NM
3/17E
1.79
0.26
1.60
3.38
1.70
1.68
0.10
1.58
0.54
3/18E
1.92
0.33
1.60
3.52
1.66
1.86
0.15
1.71
0.58
Balance sheet (Rs mn)
--
3/16E
3/17E
3/18E
Gross loans
NPLs
Loan loss reserves
Total interest earning assets
Other non-interest earning assets
Total assets
Customer deposits
Total interest-bearing liabilities
Total equity
----------
-16,643.0
8,818.7
766,972.7
65,372.9
832,345.6
0.0
666,822.4
136,444.9
-24,821.5
2,805.3
902,272.5
65,372.9
967,645.4
22,750.0
789,595.8
143,617.5
-42,850.9
1,780.3
999,766.7
65,372.9
1,065,139.6
188,150.0
878,311.2
152,396.4
CAMEL ratios (%)

C: Tier 1 capital ratio
C: Equity/loans
C: Equity/assets
A: NPL ratio
A: Loan loss reserves/NPLs
E: Net interest margin
E: Non int inc/oper revenues
E: Cost-income ratio
E: ROAA
L: Loan/deposit ratio
------------
3/16E
21.7
27.9
16.4
NM
53.0
-32.60
31.5
NM
NM
3/17E
19.5
25.5
14.8
NM
11.3
1.93
47.19
50.3
1.04
2,476.5
3/18E
17.7
22.9
14.3
NM
4.2
2.05
45.54
47.2
1.13
354.3
Loan portfolio (%)

Commercial & corporate
Mortgages/home loans
Consumer
-----
3/16E
NM
NM
NM
3/17E
NM
NM
NM
3/18E
NM
NM
NM
Valuation (current price)

P/E basic (X)
P/B (X)
P/PPOP (X)
Dividend yield (%)
------
3/16E
NM
1.52
8.9
0.0
3/17E
22.1
1.44
13.7
0.9
3/18E
18.1
1.36
11.0
1.1
EPS, basic (Rs)

EPS, fully-diluted (Rs)
---
(1.72)
(1.72)
2.76
2.76
3.38
3.38
EPS, basic growth (%)

EPS, fully diluted growth (%)
---
---
260.1
260.1
22.4
22.4
BVPS (Rs)
DPS (Rs)
---
40.23
0.00
42.35
0.55
44.93
0.68
Note: Last actual year may include reported and estimated data.
Source: Company data, Goldman Sachs Research estimates.
Analyst Contributors
Rahul Jain
rahul.m.jain@gs.com
Tabassum Inamdar, CFA
tabassum.inamdar@gs.com
Mayank Bukrediwala
mayank.bukrediwala@gs.com
Goldman Sachs Global Investment Research
November 30, 2015
Table of contents
Executive summary: Better investment opportunities elsewhere
IDFC Bank to join the club of corporate-oriented banks
Strategy: A mixed bag
10
Profitability to recover only gradually
14
Risk reward unfavorable; initiate Sell with 8% downside
16
Comparison with Yes Bank
18
Key risks
20
Appendix
21
Disclosure Appendix
23
Prices in this report are as of the close of November 26, 2015, unless otherwise stated.
Exhibit 1: Private banks coverage valuation summary
Market Cap
3m
ADVT
11/26/2015
12m TP/
Valuation
Rating
(US$ mn)
(US$ mn)
Price (Rs)
(Rs)
Axis
Buy
Federal
Buy
HDFCB
Neutral
ICICIB
Buy
ICICI Bank standalone valuation
IndusInd Bank
Neutral
17,217
1,446
41,712
25,498
71.5
4.7
24.0
56.9
Upside/
Downside
Potential
(%)
P/B (X)
FY16E
P/E (X)
FY17E
P/ABVPS (X)
ROA (%)
FY16E
FY17E
FY16E
FY17E
FY16E
FY17E
13.1
11.0
21.9
12.6
10.9
23.2
10.3
7.2
17.6
10.6
9.0
17.7
2.3
1.3
3.7
2.0
1.5
3.1
2.0
1.1
3.2
1.7
1.3
2.7
1.7
1.0
1.9
1.8
1.6
1.9
1.8
1.3
1.9
1.9
1.7
2.0
Private banks
IDFC Bank
KMB
KMB standalone valuation
Yes Bank
8,237
16.5
465
57
1,065
264
194
916
1%
2.1
1.2
3.7
1.7
1.3
3.1
Sell
3,173
3.6
62
57
-8%
NA
1.5
NA
22.4
NA
1.5
NA
1.0
Neutral
19,073
13.0
4,981
45.5
675
490
900
-1%
Buy*
684
500
750
5.2
3.9
2.3
4.5
3.3
1.9
54.0
40.3
12.4
30.6
22.7
9.7
5.2
3.9
2.5
4.5
3.3
2.1
1.5
1.2
1.7
1.9
1.8
1.8
562
78
1,090
340
270
930
21%
37%
2%
29%
20%
1.8
1.0
3.2
1.5
1.2
2.7
Note: *denotes stock is on our Conviction List. For IDFC Bank, FY16 numbers are not comparable as it does not include a full year of banking ops.
Source: Datastream, Goldman Sachs Global Investment Research.
Related Research
Pass on bank license hype; bank on existing Buys and stay Neutral on IDFC/LICH, dated
November 22, 2013
IDFC Ltd: Bank spin-off: The riddle of the net payoff, dated April 1, 2015
IDFC Ltd: Bank spin-off, Part 2: Solving the riddle; down to Sell, dated September 22, 2015
November 30, 2015
Executive summary: Better investment opportunities elsewhere

We initiate coverage on IDFC Bank (IDFB) with a Sell rating and a 12-month SOTP-based
target price of Rs57, implying 8% downside. We believe the newly formed bank is likely to
underperform its peers, given: (1) subdued return trajectory (partly due to regulatory
requirements and higher operating costs); (2) lower headline loan growth even though
we expect a strong growth momentum in other non-infrastructure oriented businesses; (3)
likely tepid build out of liability franchise which would have otherwise neutralized the
impact of high regulatory costs (statutory liquidity and cash reserve ratios, priority sector
norms etc.); (4) relatively higher execution risk as compared to other existing private
(PVT) banks; and (5) lack of technical support as other existing PVT banks now have
ample foreign holding room available compared to IDFB. IDFB currently trades at a 12month forward P/B of 1.5X as compared to our target price implied 12-month forward P/B
of 1.4X.
We would turn constructive on the stock if we see: (1) sharp improvement in macro,
leading to improvement in asset quality and better lending opportunities (as the private
capex cycle picks up); (2) better strategy on retail banking (including low cost deposits and
high yielding retail assets); and (3) diversification of revenue streams driven by sustainable
fee income stream. Our bull case scenario suggests that the average ROA over FY18EFY24E can improve by c.30bps against our base case on better CASA mix, higher
proportion of high yielding loan book and better operating efficiency (refer to Exhibit 38).
#1: We believe IDFBs return ratio would remain subdued over the next five years on
higher regulatory costs and banking-related opex. Even if its ROA were to recover
from our expectations of c.1% in its first year of banking operations, we believe it
would likely remain below median ROAs for peers, thus limiting any potential
significant re-rating of valuation.
Exhibit 2: While IDFBs return ratios could fall in the near
term on account of regulatory and banking-related
costs
Exhibit 3: we do not expect its returns to reach levels

similar to other PVT banks over the next five years
ROE comparison, PVT banks
ROA comparison, PVT banks

FY16E
FY18E
FY16E
2.1
FY18E
25
%
1.7
20
1.3
15
0.9
10
0.5
5
FED
YESB
AXBK
HDBK
KTKM
ICBK
INBK
IDFB
ICBK
INBK
KTKM
FED
AXBK
HDBK
Note: ROA for IDFB refers to the period of FY17E and FY21E.
Note: ROE for IDFB refers to the period of FY17E and FY21E.
Source: Goldman Sachs Global Investment Research.
YESB
IDFB
November 30, 2015
#2: Although we foresee a strong non-infrastructure loans growth momentum in the

wholesale and SME segments, we expect headline loan growth to remain subdued,
mainly driven by the lack of activity pick up in the infrastructure segment (accounts
for c.100% of IDFBs loan book at present), repayment of loans and deleveraging that
may cap the growth pick up.
Exhibit 4: IDFB is likely to deliver lower growth compared to other new private banks of a similar size such as YESB,
INBK and KTKM on account of lower growth in infra book (81% of loan book in FY17E), with bulk of the incremental
growth likely coming from other segments which we estimate would deliver 55% CAGR over FY17E-21E
CAGR FY16-18E
Loan Mix
Rs1.2tn
7%
Rural
12%
SME
CAGR
FY17-21E
25
22.5
20
12%
Retail
15
Corp. 19%
16.8
Rs0.56tn
10
50%
81%
5.8
0
ICBK
AXBK
HDBK
INBK
FED
YESB
KTKM
IDFB
FY17E
Infra
CAGR :8.7%
30
Non-Infra
CAGR : 55%
IDFB loan CAGR breakdown and comparison with other PVT banks
FY21E
#3: We expect IDFBs liability franchise build out to remain tepid, over its first five
years of operations, which otherwise would have been helpful to partially offset high
regulatory costs besides building a granular liability franchise expeditiously.
Moreover, with regulators focusing on ensuring that banks have stable and granular
funding resources (net stable funding ratio and liquidity coverage ratio), we believe it
would be essential for IDFB to focus on its deposit franchise. IDFBs management plans to
initially rely on the digital platform for its consumer banking businesses (including its
liability franchise), which could be an interesting strategy (as none of its peers are focusing
solely on digital) but the jury is still out. For most of the other existing PVT banks, despite
their significant focus on the digital platform, they are also focusing on ramping up their
distribution network.
Exhibit 5: We believe managements strategy to rely
significantly on the digital channel to build out IDFBs
retail liability franchise
Exhibit 6: would likely lead to a slower pick up in

deposits
SA as % of liabilities
CA as % of liabilities
IDFB
ICBK
YESB
KTKM
IDFB
60%
ICBK
YESB
KTKM
18%
16%
50%
14%
40%
12%
10%
30%
8%
20%
6%
4%
10%
2%
0%
0%
Yr1
Yr4
Yr6
Yr8
Source: Company data, Goldman Sachs Global Investment Research.
Yr1
Yr4
Yr6
Yr8
November 30, 2015
#4: We view IDFBs risk reward profile as unfavorable, with the stock trading at 1.5X
12-month forward book, +28%/-22%/-27% vs. the valuations of ICBK/AXBK/YES.
Moreover, we believe the lack of support from technical factors such as the relaxation
of foreign ownership limits creates ample foreign holding room in other PVT banks
(27%-41%) vs. IDFB (25%), leading to potential share price underperformance.
Exhibit 7: IDFB currently trades at a 13% discount to
peers; we believe it warrants a higher discount
Exhibit 8: given its relatively lower returns in the near

term and higher execution risk
12m fwd P/B vs. avg ROA, PVT banks
Comparison on key metrics
4.0
R = 0.303
(X)
IDFB
Corporate Bank Average
30
Sell
Buy
KTKM
3.5
1.8
RHS
LHS
HDBK
1.6
25
INBK
3.0
1.4
1.2
12m fwd P/B
20
2.5
1.0
YESB*
2.0
15
AXBK
0.8
IDFC Bank
1.5
10
FED
1.0
0.6
ICBK
0.4
5
0.2
0
0.5
0.0
.
0.0
1.1%
1.2%
1.3%
1.4%
1.5%
1.6%
1.7%
1.8%
1.9%
LT Asset
growth (%)
2.0%
LT ROE (%)
Tier 1 Ratio (%) Net Impaired

Loans (%)
LT ROA (%)
12m fwd PB (X)
Average ROA (FY16-18)
Note: 1) ROA avg for IDFC Bank is for the period FY17E-19E. 2) *denotes stock
is on our Conviction List.
Note: LT asset growth, ROA and ROE are for avg FY17E-24E. Tier 1 ratio and
net impaired loans are as of FY16E.
Exhibit 9: We also expect IDFB to deliver lower returns

and growth compared to peers over the long term
Exhibit 10: Foreign room holding in IDFB is lower vs.

other PVT banks as it has regulatory constraint of 49%
foreign ownership (vs. 74% for other banks) for first 5
years of ops
12m fwd P/B (bubble size) vs. RIM assumptions of LT ROA &
asset growth
Foreign holding room available (as of Sep 15)

Buy
2.0
Neutral
Sell
Total Foreign Holding

1.0
1.9
ICBK
60
27.7
27.7
32.1
41.6
AXBK
1.7
6.5
INBK
HDBK
KTKM
LT Avg ROA
4.2
70
1.8
Foreign Holding room
80 %
50
YESB*
1.6
40
73.0
1.5
69.8
24.7
67.6
30
IDFB
1.4
46.3
1.2
19
41.9
32.4
Size of bubble indicates 12m fwd PB
18
46.3
20
FED
1.3
20
21
22
23
24
25
26
27
28
LT Asset CAGR
24.3
10
0
HDBK
INBK
ICBK
KTKM
AXBK
YESB
FED
IDFB
Note: 1) LT ROA & asset growth is for the period of FY17E-24E based on RIM
assumptions for all banks except IDFB which is for the period FY17E-28E. 2)
*denotes stock is on our Conviction List.
Source: Datastream, Goldman Sachs Global investment Research.
Source: RBI, Company data.
November 30, 2015
IDFC Bank to join the club of corporate-oriented banks

Exhibit 11: Our DuPont analysis suggests IDFBs 10-year average could be similar to YES Bank
Comparison of banks using DuPont analysis (%)
FY17E
Du -pont Analysis
Net interest income adjusted
Other income
Total income
Operating expenses
Employees
Others
Pre provision income
Provisions
Pre -tax pre extraordinary income
ROA
ROE
10 yrs Avg
AXBK
3.41
2.01
ICBK
3.20
1.91
YESB
3.15
1.85
IDFB
1.79
1.60
AXBK
1.93
2.02
ICBK
1.91
2.24
YESB
2.48
1.99
IDFB
2.36
1.76
5.42
2.08
0.68
1.40
3.34
0.58
2.76
1.82
19.0
5.11
1.89
0.78
1.11
3.22
0.55
2.67
1.90
15.3
4.99
2.01
0.84
1.18
2.98
0.36
2.62
1.77
21.7
3.38
1.70
0.77
0.93
1.68
0.10
0.54
1.04
6.7
3.95
1.66
0.40
1.25
2.30
0.49
1.80
1.01
20.3
4.15
1.98
0.55
1.43
2.16
0.68
1.46
1.22
13.7
4.47
2.14
1.14
0.99
2.33
0.24
2.05
1.36
18.0
4.12
1.65
0.74
0.92
2.46
0.31
2.15
1.42
13.2
Note: FY17E is the first full year of banking ops for IDFC Bank; 10 years avg. for each bank is calculated from the start of their banking ops, except for ICBK whose
starting year is FY03, the first full year after its reverse merger. For IDFC Bank, it is an 8-year average from FY17E-24E.
Comparison with corporate-oriented banks on multiple metrics

While we acknowledge that a direct comparison between IDFB and other existing banks
may not be indicative as operating metrics differ depending on macro, interest rate cycles,
liquidity conditions etc., we believe the trajectory that these banks have witnessed, could
be useful to get a sense as to how IDFBs operating metrics may progress. We expect:
(1) Loan book mix to gradually change like the way it did for other banks in the past.
However, it will remain wholesale heavy, in our view.
Exhibit 12: IDFBs corporate book likely to moderate over

time
Exhibit 13: similar to other corporate-oriented banks

Corporate loans incl. SMEs as a % of total loans
Loan breakup & growth rate of IDFB
3,000
ICBK
Infrastructure loans
Non-Infra. loans
Retail
Business banking/SME
Rural banking
Growth rate
AXBK
IDFB
YESB
120%
30%
Rs. bn
100%
2,500
25%
8%
19%
2,000
80%
20%
60%
7%
1,500
14%
15%
17%
7%
7%
11%
18%
1,000
500
12%
10%
20%
20%
15%
81%
37%
57%
40%
22%
5%
44%
0%
0%
FY17E
FY20E
FY22E
Yr1
Yr2
Yr3
Yr4
Yr5
Yr6
Yr7
Yr8
Yr9
FY24E
November 30, 2015
(2) Net interest margins to initially compress due to priority sector requirements.
However, we expect it to improve over time due to change in loan book mix and
improvement in CASA ratio. We believe the trajectory would be similar to what was
seen at ICICI Bank given reverse merger by parent with itself that increased regulatory
reserve requirement such as SLR (statutory liquidity ratio), CRR (cash reserve ratio)
and PSL (priority sector lending).
Exhibit 14: ICBKs trajectory post 2002 could give a sense
about the likely trajectory at IDFB
NIM IDFC Bank vs. ICICI Bank, Yes Bank, Axis Bank
Exhibit 15: For CASA liabilities, we believe YES Bank

could be used as an example given changed market
dynamic vs. FY93 (when new licenses were given out),
intense competition and limited brand recall
CASA to total liabilities for IDFB, YESB, KTKM and ICBK
IDFB
3.5
ICICI Bank
Yes Bank
IDFB
Axis Bank
Yes Bank
KTKM
ICBK
60%
50%
3.0
40%
2.5
30%
2.0
20%
1.5
10%
1.0
0%
T-1
Yr1
Yr4
Yr6
Yr8
Yr1
Yr2
Yr3
Yr4
Yr5
Yr6
Yr7
Yr8
Note: Yr1 for IDFC Bank is FY17E, while that for YESB & KTKM is FY05; ICBK
is FY03 and Axis Bank is FY97.
Exhibit 16: Fee income to total loans will pick up as IDFB

diversifies its client mix, product and loan mix
Exhibit 17: Fee income proportion in total income will

likely catch up only in the later part of the build-out
phase, similar to other banks
Fee income to total loans for IDFB, YESB & ICBK
Fee to total income for IDFB, YESB and ICBK

IDFB
Yes Bank
ICICIBK
IDFB
3.0%
Yes Bank
ICICIBK
40%
35%
2.5%
30%
2.0%
25%
1.5%
20%
15%
1.0%
10%
0.5%
5%
0.0%
Yr1
Yr2
Yr3
Yr4
Yr5
Yr6
Yr7
Yr8
0%
Yr1
Yr2
Yr3
Yr4
Yr5
Yr6
Yr7
Yr8
November 30, 2015
Exhibit 18: Off balance sheet mix will likely improve
Exhibit 19: providing support to fee income
Proportion of off b/s to total b/s
Fee income to risk-weighted assets (RWA) for IDFB, YESB &

ICBK
IDFB
ICBK
AXBK
YESB
IDFB
1.8%
400%
Yes Bank
ICICIBK
1.6%
350%
1.4%
300%
1.2%
250%
1.0%
200%
0.8%
150%
0.6%
100%
0.4%
50%
0.2%
0.0%
0%
Yr1
Yr2
Yr3
Yr4
Yr5
Yr6
Yr7
Yr1
Yr8
Yr2
Yr3
Yr4
Yr5
Yr6
Yr7
Yr8
(3) Branch expansion and opex ratios: IDFB is focusing on ramping up distribution
network in rural/semi urban areas to build its micro/PSL eligible book. While this is a
right move in our view, we believe branch expansion is equally important in
metro/urban areas, besides focusing on digital banking platforms. A look at other
banks indicates most banks largely have a uniform distribution mix. Having said that,
we believe due to gradual recovery in macro, the recovery in IDFBs topline will be
gradual and hence its cost-to-income ratio would be stretched initially till FY19E.
However, given intense competition from existing large banks and smaller private
banks (including new specialized banks) and regulatory requirements like NSFR (net
stable funding ratio) and LCR (liquidity coverage ratio), we believe IDFB would need to
focus on building a granular deposit base.
Exhibit 20: While the bank will focus initially on
rural/semi urban, it will need to ramp up network even in
metro/urban eventually, in our view
Exhibit 21: Most banks largely have a uniform

distribution of mix
Branch distribution of ICICI Bank, Axis Bank, Yes Bank
Branch distribution of IDFB

Rural
1,000
Rural
Semi-urban
Urban
Semi-Urban
20%
800
3,500
24%
25%
25%
23%
32%
30%
19%
22%
HDBK
ICBK
3,000
700
2,500
600
25%
29%
18%
2,000
500
24%
14%
400
25%
1,500
11%
21%
14%
18%
1,000
12%
300
100
Metro
4,000
900
200
Urban
Metro
13%
500
7%
40%
14%
7%
71%
52%
FY17E
FY20E
45%
29%
26%
18%
25%
12%
45%
33%
55%
24%
17%
13%
IDFB
INBK
FED
22%
AXBK
Note: Data on IDFB is for FY22E, while for ICBK, AXBK & YESB is as of FY15.
0
FY22E
FY24E
Source: Company data.
November 30, 2015
Exhibit 22: Within the expense break up, we expect other

expenses to account for dominant proportion
Exhibit 23: similar to YES Bank

Employee and other expenses at Yes Bank (FY05-15)
Employee and other expenses at IDFB (FY15-24E)

Employee Expenses
60
25
Other Expenses
Employee Expenses
Other Expenses
(Rs bn)
20
50
57%
40
60%
15
30
10
57%
20
49%
53%
5
55%
10
45%
T-1
Yr1
49%
41%
43%
47%
41%
59%
43%
40%
Yr4
Yr6
Yr8
51%
47%
53%
59%
51%
FY05
FY08
FY10
FY12
FY15
Exhibit 24: IDFBs cost-to-assets trajectory to improve on

productivity gains, similar to YES Bank
Exhibit 25: Similarly, even cost-to-income will improve

Cost to income ratio for IDFB, YESB & ICBK
Cost to asset ratio for IDFB, YESB & ICBK

IDFB
Yes Bank
ICICIBK
IDFB
3.5%
120%
3.0%
100%
2.5%
80%
2.0%
60%
1.5%
40%
1.0%
20%
0.5%
Yes Bank
ICICIBK
0%
Yr1
Yr4
Yr6
Yr8
Yr1
Yr4
Yr6
Yr8
Please refer to Exhibit 45 for details on reference years as used in Exhibits 22, 24-25.
Strategy: A mixed bag

IDFBs strategy appears to be a mixed bag at this stage. While focusing on micro loans to
meet priority sector loans targets, and leveraging and deepening existing relationships are
steps in the right direction, its strategy on the retail and consumer banking segments
(excluding rural) could have been better as expediting retail build out could help partially
offset higher regulatory costs (SLR, CRR and PSL). Management plans to initially mainly
rely on its digital platform for consumer banking, which we are uncertain as to how
successful it would be as there is no precedence in India. Moreover, other private banks
continue to focus on branch expansion to grab market share, besides focusing on digital
channels. We believe IDFBs ROA would remain low at c.1% in FY17E before recovering to
a sustainable level of c.1.6% by FY24E.
10
November 30, 2015
Exhibit 26: Bifurcating the business into 3 broad categories; consumer strategy is not very exciting, in our view, at least
for now
Broad contours on banking strategy
Wholesale and Corporate
Micro/Rural banking
Consumer banking
Mgt. Strategy
Mgt. Strategy
1. As per mgt, this is the most difficult

piece to build...
2. ... given heavy investments and
intense competition
3. Mgt. plan to rely more on digitial
initially to generate traction
4. Will offer a complete product suite
over time but initially focus will be on
affordable housing
Mgt. strategy
1. Will be a growth engine, chiefly the
non-infra part;
2. Leverage and deepen existing
relationships;
3. Focus is on diversification of loan
mix and improve revenue streams
1. Plan to follow micro finance rural

NBFC/model
2. Asset centric approach
3. Significant branch expansion will
in rural areas...
4. Supplemented by outreach model
GS View
GS View
1. Domain expertise in infra-related
project finance should be helpful;
2. Understanding / involvement in govt.
policies a plus;
3. Current deposits and off balance sheet
businesses should benefit from existing
relationships
4. While execution and macro pick up
will be the key, we expect IDFB to grow
non-infra piece at 46% CAGR over
FY17E-24E
GS View
1. A right strategy in our view as cost
for not meeting PSL is onerous
2. We estimate rural/micro could
grow at 44% CAGR to c.8% of loan
book by FY24E
3. Profitability wise, while NIMs
would be better, opex will be higher
initially
1. We are somehow not excited about

the strategy, at least for now
2. While digital is an important
platform, branches are equally
important esp. in metro and urban
centers which can be more profitable
over time given scalability, cross sell
opportunities and higher CASA
balances in metro and urban
3. PVT banks still expanding
distribution network despite focusing
on digital channels
11
November 30, 2015
Exhibit 27: IDFC Bank to remain a corporate-centric bank amid a gradual retail build-out
Particulars
Branches
CASA ratio
Loan growth
Cost/asset ratio
PAT growth
Cost of equity
ROAs (%)
Period
5th Year
8th Year
5th Year
8th Year
5 yr CAGR
8 yr CAGR
5 yr average
8 yr average
5 yr CAGR
8 yr CAGR
Average
Banking Business
532
912
7.7%
12.3%
22.6%
23.4%
1.7%
1.7%
30.3%
29.3%
13.0%
5 yr average
8 yr average
5 yr average
8 yr average
ROEs (%)
1.3%
1.4%
10.0%
13.2%
1.4
P/B Multiple (X)
Note: This is based on standalone financials of IDFC Bank; Yr 5: FY21; Yr 8: FY24.

Exhibit 28: We expect IDFC Banks ROA to recover from 1.04% in FY17E to c.1.6% levels in FY24E
DuPont analysis of IDFC Bank
IDFB
NII
Non interest income
Total income
Opex
- Emp. Expenses
- Others
PPoP
Prov. (total)
PBT
Tax
ROA
ROE
FY17E
1.79
1.60
3.38
1.70
0.77
0.93
1.68
0.10
1.58
0.54
1.04
6.69
FY18E
1.92
1.60
3.52
1.66
0.78
0.88
1.86
0.15
1.71
0.58
1.13
7.74
FY19E
2.33
1.71
4.04
1.79
0.80
0.99
2.25
0.21
2.04
0.69
1.35
9.82
FY20E
2.51
1.69
4.20
1.75
0.83
0.92
2.45
0.29
2.16
0.74
1.43
11.56
FY21E
2.56
1.81
4.37
1.62
0.72
0.90
2.75
0.42
2.33
0.79
1.54
14.20
FY22E
2.55
1.95
4.51
1.58
0.68
0.90
2.93
0.45
2.48
0.84
1.63
16.92
FY23E
2.60
1.87
4.46
1.55
0.67
0.89
2.91
0.44
2.47
0.84
1.63
18.59
FY24E
2.62
1.82
4.45
1.57
0.63
0.94
2.88
0.44
2.44
0.83
1.61
19.85
12
November 30, 2015
Exhibit 29: Given its existing relationships with

corporates, IDFB should be able to ramp up current a/c
deposits in line with other corporate banks
Exhibit 30: However, we believe SA growth would be

gradual given: (1) low brand recall; (2) initial focus on
rural; and (3) higher focus on digital
CA as % of liabilities
SA as % of liabilities
IDFB
ICBK
YESB
KTKM
IDFB
60%
ICBK
YESB
KTKM
18%
16%
50%
14%
12%
40%
10%
30%
8%
6%
20%
4%
10%
2%
0%
0%
Yr1
Yr4
Yr6
Yr1
Yr8
Yr4
Yr6
Yr8
Exhibit 31: We believe branch expansion would be key

for IDFB as other banks, especially smaller ones, have
been growing at a rapid pace despite gaining size
Exhibit 32: and have a uniform distribution mix

Distribution of bank branches, by region
Bank branches as of 2Q16 & 3-yr CAGR (FY13-15)

Rural
4,500
Semi-Urban
Urban
Metro
14.5%
14.3%
4,000
4,000
3,500
3,500
24%
25%
25%
23%
32%
30%
19%
22%
HDBK
ICBK
3,000
3,000
15.3%
2,500
2,500
2,000
2,000
25%
24%
1,500
1,500
6.3%
25.1%
14%
18%
1,000
1,000
26.6%
21.0%
500
500
YESB
INBK
FED
KTKM
Source: Company reports.
AXBK
ICBK
HDBK
18%
25%
12%
45%
IDFB
29%
26%
33%
55%
24%
17%
13%
INBK
FED
22%
AXBK
Source: Company reports.
13
November 30, 2015
Exhibit 33: We expect IDFB to have a higher cost to

income and will likely moderate in line with other
corporate-oriented banks
Exhibit 34: Likewise, cost to assets will likely improve

over time as growth picks up and operating leverage
kicks in
Cost-to-income Bank wise
Cost-to-assets Bank wise
Yr1
Yr4
Yr6
Yr8
Yr1
Yr4
Yr6
Yr8
4.5%
120%
4.2%
110%
4.0%
100%
3.5%
3.1%
3.1%
65% 67%
60%
55%
49%
53%
2.1% 2.0%
2.0%
50%
48%
2.4%
2.5%
54%
52%
2.0%
37% 38%
38%
1.6%
1.6%
42%
40%
3.1%
3.0%
80%
35% 35%
1.5%
1.4%
1.6% 1.6%
1.4% 1.4%
1.3%
1.0%
20%
0.5%
0%
0.0%
YESB
ICBK
KTKM
IDFB
YESB
ICBK
KTKM
IDFB
Please refer to Exhibit 45 for details on reference years as used in Exhibits 29-30, 33-34.
Profitability to recover only gradually and remain below median

We estimate that IDFBs ROA will be lower initially, due to: (1) priority sector gap and likely
penalty on non-compliance; we estimate IDFB to buy-out eligible securities from micro
finance institutions (MFIs)/non-banking financial companies (NBFCs) to meet PSL
requirements; (2) higher operating cost on ramp up of distribution mix; and (3) lower fee
income. We expect IDFBs ROA to initially decline to c.1% in FY17E (first full year of
operation) and recover to levels of 1.5%-1.6% over the next 7-8 years, similar to other
corporate-oriented banks.
In terms of its new strategy, we view its focus on micro lending as positive in the long run
as it will limit potential penalties related to the non-compliance of PSLs (priority sector
loans). In the short run, while it will support NIMs, it will be opex heavy. We believe key to
higher ROAs include better CASA ratio, retail fee income and growth pick up.
14
November 30, 2015
Exhibit 35: We expect IDFBs ROA to shrink over FY1517E, due to lower NII, high opex and provision costs
Exhibit 36: but it will likely improve over time

Incremental ROA of IDFC Bank (FY17E-24E)
Incremental ROA of IDFC Bank (FY15-17E)

2.5
2.5
0.14
2.0
-0.26
2.0
1.5
0.23
-0.35
-1.14
1.5
1.0
0.12
2.10
0.84
0.10
1.0
0.5
-1.27
1.04
0.94
1.61
0.5
(0.5)
1.04
FY15 ROA
NII
Oth. Inc
Op-ex
Provisions
Tax
FY17E ROA
FY17E ROA
NII
Oth. Inc
Op-ex
Provisions
Tax
FY24E ROA
Note: FY15 numbers are based on pro-forma lending business of IDFC Ltd.
Sensitivity analysis on ROA: Bull and Bear case

We attempt to construct both bull and bear case scenarios based on varied past examples,
such as: (1) Axis Bank/FED Bank for fee income trajectory; (2) ICBK/AXBK for opex ratios; in
addition to (3) sensitivity to NIMs on 100bps sensitivity on CASA loans and high yielding
book. Though we acknowledge that each of these banks have had different business
trajectories and cycles and may not be fully representative, we feel it could provide some
anchor.
The key assumptions for our sensitivity analysis:
Bull case: (1) Higher average NIMs by 18bps over FY18-24E driven by 100bps higher CASA
ratio, better high-yielding loan book and better tier I ratio; (2) higher fee income to assets of
6bps, based on trajectory seen in first 10 years of Axis Banks operations; and (3) slightly
better opex to assets, taking best case example of Axis Bank though we acknowledge that
Axis did not have any legacy book. This leads to higher ROAs at 1.76%, similar to above
median ROAs in the banking system currently.
Bear case: (1) Lower average NIMs by 17bps driven by lower CASA ratio, lower mix of
high-yielding book and lower Tier I ratio by 100bps; (2) lower fee income by 11bps, similar
to FED Bank (old private sector); and (3) higher opex ratio based on average of ICBK and
AXBK. This leads to lower ROAs of c.1%, much lower than private banks average of c.1.7%.
15
November 30, 2015
Exhibit 37: We believe execution is key; our bear case

analysis, based on various examples, indicates that long
term avg. ROAs, if execution goes wrong, could be
c.1%...
Exhibit 38: while bull case long-term average ROAs

could be 1.76%, c.30bps higher than our base case,
contingent upon successful execution
Bull case ROA (avg. FY18E-24E)
Bear case ROA (avg. FY18E-24E)
1.7
1.8
0.04
1.5
1.7
0.06
-0.17
1.3
1.6
-0.11
1.1
0.18
1.5
-0.19
1.76
1.47
0.9
1.4
1.47
1.00
0.7
1.3
0.5
1.2
ROA Base case
NIM
Fee Income
Opex
Bear case ROAs
ROA Base case
NIM
Fee Income
Opex
Bull case ROAs
Risk reward unfavorable; initiate at Sell with 8% downside

Given our view that IDFBs ROA is likely to remain subdued (we expect c.1.5% by FY21E)
while growth will pick up gradually over the medium term, we expect IDFB to trade at 1.4X
12-month forward banking book (FY18E book value discounted to 2QFY17E), as implied by
our RIM (residual income model) derived banking value of Rs52/share. In addition to the
banking business, we also incorporate value for the existing private equity and project
equity AUMs (Rs5/share, based on 10%-15% of AUMs) in our derivation of IDFBs target
price as management has transferred the existing investment book to IDFB post the
demerger.
We adopt the RIM methodology to value IDFBs banking business in line with the
methodology used to value the lending business of all other banks in our coverage.
The RIM methodology values stocks by adding the book value of the company to the
present value of residual income (based on ROE vs. cost of equity) over a 12-year forecast
period, and the present value of a terminal value (based on our long-term total asset
growth and ROE assumptions).
We see IDFBs risk reward profile as unfavorable, with the stock trading at 1.5X 12-month
forward book, +28%/-22%/-24% vs. the valuations of ICBK/AXBK/YES. We believe our Buyrated PVT banks (YES Bank, ICICI Bank, Axis Bank and FED Bank), which offer upsides of
21%-37%, are better positioned as they offer higher return ratios, liability franchise and
diversified loan with relatively lower implementation risk.
We believe the governments relaxation of foreign ownership limits for PVT banks
(removing sub limits within foreign ownership), thereby creating ample ownership room in
PVT banks (27%-41%) vs. IDFB (25%), would also lead to the latters share price
underperformance. Hence, we initiate coverage on IDFB at Sell with a 12-month SOTPbased target price of Rs57.
16
November 30, 2015
Exhibit 39: We see downside potential of 8% from current

levels based on our SOTP based (RIM for banking
business) 12m TP of Rs57
Exhibit 40: IDFBs valuation at 1.5X 12m fwd P/B is

unsustainable in our view given lower returns vs. peers
12m fwd P/B vs. avg ROA, PVT banks
RIM assumptions for banking business of IDFB

4.0
RIM Assumption
(FY17-28E)
R = 0.303
(X)
Buy
Sell
KTKM
3.5
18.5
3.0
ROA (%)
1.43
2.5
EPS growth (%)
21.9
ROE (%)
14.7
COE (%)
13.0
Dividend Payout (%)
20.0
Tier 1 Ratio
13.2
12m fwd P/B
Asset growth (%)
INBK
YESB*
2.0
1.5
HDBK
AXBK
IDFC Bank
ICBK
FED
1.0
0.5
0.0
1.1%
1.2%
1.3%
1.4%
1.5%
1.6%
1.7%
1.8%
1.9%
2.0%
Average ROA (FY16-18)
Implied 12m fwd target PB (X)
1.4
Implied value per share (Rs)
57
Difference vs. Current Price (%)
Note: *denotes stock is on our Conviction List.
-8%
Exhibit 41: We believe returns and growth to justify higher valuations of greater than
1.75X P/B would be difficult to achieve for IDFC given a large legacy book along with
regulatory costs and a higher opex burden initially
Scenario analysis Implied RIM assumptions for higher banking business multiples
RIM Assumption
(FY17-28E)
Scenario Analysis
1.75X
2.0X
Asset growth (%)
22.1
24.4
ROA (%)
1.55
1.65
EPS growth (%)
27.0
29.3
ROE (%)
16.5
16.4
COE (%)
13.0
13.0
Dividend Payout (%)
20.0
15.8
Tier 1 Ratio
13.8
13.3
Implied 12m fwd target PB (X)
1.75
2.0
80
90
30%
46%
Implied value per share (Rs)

Difference vs. Current Price (%)
17
November 30, 2015
Comparison with Yes Bank

Based on our interaction with investors, we realised that some of them are of the view that
IDFBs valuation multiple could be compared with the initial trading multiples of YES Bank,
as they believe IDFBs growth would be strong, ROAs and ROEs would improve
significantly, and asset quality is better. While we agree with some of the points such as
scope for higher growth and asset quality not being a major concern, we believe YES Bank
would not be a right comparison from a valuation perspective given: (1) the market itself
was trading at premium valuations when YES Bank was listed; (2) YES Bank did not have
any legacy book and it managed to deliver much higher ROEs due to adequate
capitalization levels (though the ROA trajectory will likely be similar); (3) the macro
environment was picking up and was much better than the current environment; and (4)
YES Bank did not have any legacy asset quality issues.
1.
2.
3.
Growth at IDFC Bank will be fairly strong as overall market share is insignificant
in systems loan book
IDFBs headline growth will be relatively lower in the initial phase, in our view,
because of the lack of pick up infrastructure activity. We believe most of the
growth would be driven by non-infra/rural banking/SME. On non-infrastructure
corporate loans, given that competition from existing PVT banks to gain market
share in corporate loans has picked up (average growth over the past four quarters
in corporate book: HDBK 23.7% yoy, AXBK 21% yoy), IDFBs profitability could
be pressured.
We believe investors focus would gradually shift to the profitability of IDFBs loan
growth and whether it is sustainable in the absence of a strong retail liability
franchise. Further, we believe IDFB would also need to maintain high levels of
liquid assets due to stringent liquidity coverage norms which in turn would be a
drag on profitability.
Asset quality pain is behind us
While we acknowledge that cleaning up of bad loans is a prudent move and it will
insulate the banking business from any legacy book issues, we believe the net
impaired loans would continue to be fairly high at c.6% of net loans in FY16E (ICBK
at 4.5%; AXBK at 3%).
We estimate the PCR excluding gas based projects would be c.35%. As such, we
assume minimum coverage of +50% on the entire stressed book (including 5/25
refinance) for other PVT banks.
In terms of recovery from these bad loans, we believe discom reforms and
availability of gas to power projects would be positive, but it would be difficult to
estimate the provisioning release due to that. Moreover, we estimate a low loan
loss provisions in the initial 3-5 year period to factor in some benefit due to an
improving macro.
Downside is limited as IDFB is already trading at a discount to other PVT banks
IDFC Banks valuation (12-month forward P/B) is +28%/-22%/-24% vs. the

valuations of other corporate-oriented banks such as ICBK/AXBK/YES respectively
for: (1) subdued ROA trajectory; (2) no retail liability franchise which will take a
fairly long period of time to build; and (3) concentration of loan book in wholesale
than in retail.
18
November 30, 2015
4.
YES Bank as a fledgling bank traded at 4.6X P/B in the first three years post
listing, providing meaningful indications of where IDFB could trade at
a)
YES Bank did not have any legacy book to deal with as is the case with IDFB and
hence profitability was not marred in any way;
b)
YES Bank did not have to immediately onboard PSL assets as it did not have any
legacy book unlike IDFB due to regulatory pressures;
c)
YES Bank generated 1.5%-1.6% ROAs and 14%-20% ROEs in its first five years of
operations; and
d)
P/B multiple for the overall market was at a 36% premium to its 10-year average.
However, the market currently trades at c.3.2X, 6% lower vs. its 10-year average.
Exhibit 42: While we expect IDFC Banks returns to

expand post its first year of operations
Exhibit 43: similar to what we have seen for Yes

Bank
IDFC Bank vs. Yes Bank ROA evolution
IDFC Bank vs. Yes Bank ROE evolution
IDFC Bank
2.5
Yes Bank
IDFC Bank
25
2.0
20
1.5
15
1.0
10
0.5
(0.5)
Yes Bank
(5)
Yr1
Yr2
Yr3
Yr4
Yr5
Yr6
Yr7
Yr8
Yr1
Yr2
Yr3
Yr4
Yr5
Yr6
Yr7
Yr8
Exhibit 44: we do not expect IDFB to trade at similar valuations during the initial few
years, given that IDFB has an existing legacy book with asset quality issues and the
broader market is trading at much lower levels compared to when Yes Bank was listed
MSCI India vs. Yes Bank trailing P/B
MSCI India Trailing PB
7
Yes Bank Trailing PB
6
5
4
3
2
1
0
Source: Datastream, Company data.
19
November 30, 2015
Key risks
1)
Better macro impacting loan growth and asset quality: If the macro situation
recovers faster than expected, IDFB could benefit on multiple accounts: (1) Asset
quality: With IDFB declaring potential problem loans and making extra provisions
of c.Rs26bn, which is c.20% of its net worth, the probability of recovering this
amount will increase. (2) Loan growth: IDFB may see an early pick up in loan
growth amid a better macro backdrop and revival of the capex cycle.
2)
Faster improvement in operating leverage: We expect IDFBs ROAs to be

impacted by higher opex ratios in the near term. However, if IDFB were to grow
faster than expected and improve efficiency over the medium term by effectively
using its digital platforms, better cross-selling ratio etc., its ROAs could improve
faster. Our sensitivity analysis indicates that its opex ratio could improve by c.4bps
in FY18E-24E on a faster improvement in operating leverage.
3)
Better strategy on retail business: IDFBs retail franchise could be a critical factor
in developing CASA deposits and retail fee income. We estimate that a 100bps
increase in CASA deposits could drive up NIMs by 17bps. Hence, a better strategy
on retail could lead to better NIMs and fee income on higher cross-selling ratio etc.
4)
Higher P/B valuations: We believe: (1) the markets expectation of robust growth
momentum led by diversified loan book; (2) likely better asset quality trends given
clean-up of legacy book; (3) opening of FII legroom; and (4) index inclusion are
potential reasons that could drive valuations higher than we foresee. However, we
do not expect such high valuations to be sustainable given our muted view on the
macro and micro strategy.
20
November 30, 2015
Appendix
Exhibit 45: IDFC Bank summary financials
Summary Financials
FY17E
FY18E
All data in Rsbn unless otherwise specified
P&L
NII
Non Interest Income
Fee
Other
Total Income
Opex
Employee
Other
PPOP
Provisions
PBT
PAT
FY19E
FY20E
FY21E
FY22E
FY23E
FY24E
16.1
14.4
4.0
10.4
30.4
15.3
6.9
8.4
15.1
0.9
14.2
9.4
19.5
16.3
4.8
11.5
35.7
16.9
7.9
9.0
18.9
1.5
17.4
11.5
26.9
19.8
6.9
12.9
46.6
20.7
9.3
11.4
26.0
2.4
23.6
15.6
35.0
23.5
10.3
13.2
58.4
24.3
11.5
12.8
34.1
4.0
30.1
19.9
44.9
31.7
18.2
13.5
76.6
28.3
12.6
15.7
48.2
7.4
40.9
27.0
56.6
43.3
29.5
13.8
99.9
35.0
15.2
19.9
64.9
10.0
54.9
36.2
72.7
52.3
38.2
14.1
125.1
43.6
18.7
24.9
81.5
12.4
69.1
45.6
92.0
63.9
49.4
14.5
155.9
54.9
22.1
32.8
101.0
15.4
85.6
56.5
EPS (Rs/Share)
2.8
3.4
4.6
5.9
8.0
10.7
13.4
16.7
Balance Sheet
Loans
Infra
Non-Infra
Investments
SLR
Other Assets
Total Assets
563
456
107
322
150
82
968
667
487
179
313
151
85
1,065
819
529
290
334
172
91
1,244
1,015
577
439
419
239
105
1,540
1,271
638
634
572
345
119
1,962
1,586
695
891
743
440
141
2,470
1,974
789
1,185
997
599
164
3,135
2,452
912
1,540
1,234
730
193
3,879
Deposit
CASA
Borrowings
Other Liabilities
Total Liabilities
Shareholders Equity
23
2
767
34
824
144
188
23
690
34
913
152
314
47
732
34
1,080
164
543
90
783
34
1,361
180
882
137
845
34
1,762
200
1,210
206
998
34
2,242
228
1,631
304
1,197
44
2,872
263
2,082
438
1,437
55
3,573
306
42.3
3,392
44.9
3,392
48.4
3,392
52.9
3,392
59.0
3,392
67.2
3,392
77.5
3,392
90.3
3,392
Asset Quality
GNPL
GNPL Ratio (%)
Net NPL
Net NPL Ratio (%)
Total Stress Loans
Stress Loan Ratio (%)
25
4.4
22
3.9
88
15.6
43
6.4
41
6.2
97
14.6
49
5.9
47
5.8
93
11.4
49
4.8
47
4.6
84
8.3
53
4.1
47
3.7
88
6.9
60
3.7
49
3.1
95
6.0
72
3.6
55
2.8
107
5.4
84
3.4
59
2.4
119
4.9
Key Ratios
NIM (%)
Cost-Income (%)
Credit Cost (%)
CASA (% of Liabilities)
Leverage (X)
ROA (%)
ROE (%)
1.79
50.3
0.17
0.2
6.7
1.04
6.7
1.92
47.2
0.23
2.5
7.0
1.13
7.7
2.33
44.3
0.29
4.3
7.6
1.35
9.8
2.51
41.6
0.40
6.6
8.6
1.43
11.6
2.56
37.0
0.58
7.7
9.8
1.54
14.2
2.55
35.1
0.63
9.2
10.8
1.63
16.9
2.60
34.8
0.63
10.6
11.9
1.63
18.6
2.62
35.2
0.63
12.3
12.7
1.61
19.9
BVPS (Rs/Share)
Share Count (mn)
21
November 30, 2015
Exhibit 46: Reference for year of operation of selected banks that we use in our case study
ICBK
AXBK
YESBK
IDFB
Yr1
FY03
FY96
FY05
FY17
Yr4
FY06
FY99
FY08
FY20
Yr6
FY08
FY01
FY10
FY22
Yr8
FY10
FY03
FY12
FY24
Special Disclosure
One of the analysts in the coverage team is a beneficial owner of an immaterial stake of
certain bonds issued by IDFC Bank.
22
November 30, 2015
Disclosure Appendix
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Coverage group(s) of stocks by primary analyst(s)
Rahul Jain: Asia Pacific Financials. Tabassum Inamdar, CFA: Asia Pacific Financials.
Asia Pacific Financials: AIA Group, AMMB Holdings, Axis Bank, Bajaj Finance, Bajaj Finserv, Bangkok Bank, Bangkok Bank (Foreign), Bank Central
Asia, Bank Danamon, Bank Mandiri, Bank Negara Indonesia, Bank of Baroda, Bank of East Asia, Bank Rakyat Indonesia, Bank Tabungan Negara, Bank
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Hana Financial Group, Hang Seng Bank, HDFC Bank, Hong Leong Bank, Housing Development Finance Corp., HSBC Holdings, ICICI Bank, IDFC Bank
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IDFC Bank Ltd (IDFB.BO)

For a complete description of the investment

Price performance chart

INVESTMENT LIST MEMBERSHIP

Share price performance (%)

Coverage View: Neutral

The Goldman Sachs Group, Inc.

Goldman Sachs does and seeks to do business with companies

November 30, 2015

IDFC Bank Ltd (IDFB.BO)

IDFC Bank Ltd: Summary Financials

Net interest income

Earnings growth drivers (%)

DuPont analysis (%)

Balance sheet (Rs mn)

CAMEL ratios (%)

Loan portfolio (%)

Valuation (current price)

EPS, basic (Rs)

EPS, basic growth (%)

Goldman Sachs Global Investment Research

November 30, 2015

IDFC Bank Ltd (IDFB.BO)

IDFC Bank to join the club of corporate-oriented banks

Strategy: A mixed bag

Profitability to recover only gradually

Risk reward unfavorable; initiate Sell with 8% downside

Comparison with Yes Bank

Exhibit 1: Private banks coverage valuation summary

Goldman Sachs Global Investment Research

November 30, 2015

IDFC Bank Ltd (IDFB.BO)

Executive summary: Better investment opportunities elsewhere

Exhibit 3: we do not expect its returns to reach levels

ROA comparison, PVT banks

Source: Goldman Sachs Global Investment Research.

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

November 30, 2015

IDFC Bank Ltd (IDFB.BO)

#2: Although we foresee a strong non-infrastructure loans growth momentum in the

Source: Goldman Sachs Global Investment Research.

Exhibit 6: would likely lead to a slower pick up in

Source: Company data, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

Source: Company data, Goldman Sachs Global Investment Research.

November 30, 2015

IDFC Bank Ltd (IDFB.BO)

Exhibit 8: given its relatively lower returns in the near

12m fwd P/B vs. avg ROA, PVT banks

Comparison on key metrics

Corporate Bank Average

12m fwd P/B

Tier 1 Ratio (%) Net Impaired

12m fwd PB (X)

Average ROA (FY16-18)

Source: Datastream, Goldman Sachs Global Investment Research.

Source: Datastream, Goldman Sachs Global Investment Research.

Exhibit 9: We also expect IDFB to deliver lower returns

Exhibit 10: Foreign room holding in IDFB is lower vs.

Foreign holding room available (as of Sep 15)

Total Foreign Holding

Foreign Holding room