IDFC Bank to reduce infra exposure to 60% in 5 years: MD

IDFC Bank, the new private sector lender in India, aims to reduce its loan exposure to infrastructure to 60 per cent of its total book from the existing 90 per cent in the next five years.

“My big target is an annualised profit of ₹1,000 crore, growing at 10-15 per cent a year. Five years from now, 60 per cent will be infra and large corporate lending from the current 90 per cent,” said Rajiv Lall, MD and CEO of IDFC Bank.

Ring-fencing asset quality with substantial provisions for the next four to five years, Lall said that as a bank it needs to diversify the revenue base into retail, mid-market lending, non-infra lending, non-interest income, and rural lending, among others.

“We have hired a strong team representing serious talent in the financial services space. My job is to unleash that and take advantage of the market opportunities,” said Lall.

With regard to scepticism of investors on IDFC’s market value after the bank’s listing, Lall said normally banks take several years to list after starting operations. “We have listed within months. So, it’s a lot of pressure on us to perform, which is not a bad thing, but also good for shareholders and, hopefully, they can grow with us.”

The bank was listed last Friday at ₹70.50, and closed at ₹70.70 on the BSE. IDFC also stated that the book value of IDFC’s shares is ₹60.10 apiece and that of IDFC Bank ₹39.11.

“I think investors are acting very rationally. They are concerned about our asset quality and we know there are a lot of challenges in the sector... To address that, we have taken aggressive provisions against our stressed portfolio and our belief is that over the next four to five years, we will not need to make any additional provisions against our legacy.

“If the reforms in the power sector do take hold, bankruptcy law, etc., could come into picture, then we could end up extracting more value from the legacy portfolio than the provisions that we have set aside,” Lall said.

“We will not see any losses on account of asset quality now,” he added.

IDFC Bank, which began operations with 23 branches on October 19 after converting into a commercial bank from an infrastructure lender, will be focusing on the non-core income side to shore up capital. Currently, the bank’s net worth stands at ₹13,322 crore.

The bank’s employee headcount will increase to 3,000 by the end of this year from 1,300 now, with a large technology and operations team.

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