GQG Partners Increases Stake in IDFC First Bank

On September 11, IDFC First Bank witnessed a significant surge in its shares, climbing over 2%, following a substantial investment by the US boutique investment firm, GQG Partners. In a block deal worth ₹479.50 crore, GQG Partners acquired approximately 0.8% of the bank's stake, totaling around 5.1 crore shares. This acquisition occurred at an average floor price of ₹94.50 per share, offering investors a near 1% discount compared to the previous day's closing price of ₹95.35.

Stake Acquisition Details:

GQG Partners, led by Rajiv Jain, executed this acquisition by purchasing the shares in the block deal directly from IDFC First Bank's Managing Director and CEO, V. Vaidyanathan. It's noteworthy that the proceeds from this stake sale will be reinvested into the bank, and Vaidyanathan has clarified that none of the funds will be allocated for personal use.

Vaidyanathan disclosed that the primary reason for this sale was to generate funds to subscribe to stock options worth ₹229 crore. Consequently, the entire sum from the stake sale will be reinvested in IDFC First Bank, showcasing Vaidyanathan's commitment to the bank's growth. Following this transaction, he retains slightly over 1% stake in the bank.

Previous Transactions and Market Impact:

GQG Partners had previously acquired a 2.6% stake in IDFC First Bank, a deal worth ₹1,527 crore, which resulted in the bank's shares reaching a record high of ₹100.70. Notably, this surge in share price propelled IDFC First Bank into the prestigious league of India's top 10 most valuable listed lenders, with a valuation of ₹65,325 crore.

Additionally, Cloverdell Investment, the bank's largest public shareholder, had sold 4.2% stake at an average price of ₹89 in the previous week, with a portion of this stake likely being acquired by GQG Partners. As of the June quarter, Cloverdell had held a substantial 7.12% stake in IDFC First Bank.

Market Performance:

IDFC First Bank has exhibited remarkable performance in the market, with its shares surging over 64% during the year. The bank's robust growth trajectory led to its inclusion among India's top 10 most valuable listed lenders.
As of the latest available data, shares of IDFC First Bank were trading at Rs 94.50 per share, with 0.8 % of the total equity of the company changing hands during the block deal.

Utilization of Proceeds:

The bank confirmed that the net proceeds from the stake sale, amounting to ₹478.7 crore, will be utilized for several purposes. A significant portion, ₹229 crore, will go toward subscribing to new shares of IDFC First Bank. An additional ₹240.5 crore will be allocated for income tax payments associated with the exercise of stock options, while ₹9.2 crore will be directed towards contributions to pre-committed social causes. These causes include support for the National Association of Blind, the Birla Institute of Technology Scholarship Program, Rukmini Social Trust, and other social initiatives.

Background Information:

Vaidyanathan's involvement in this transaction traces back to stock options he received from Capital First, which later merged with IDFC Bank in December 2018. These Capital First stock options were converted into IDFC First Bank stock options in accordance with the amalgamation scheme agreed upon by both entities.

Conclusion:

The recent stake acquisition by GQG Partners and the commitment of IDFC First Bank's CEO, V. Vaidyanathan, to reinvest the proceeds into the bank underscore the confidence in the institution's future prospects. This move is aligned with the bank's impressive market performance, as it continues to ascend the ranks of India's most valuable lenders. Investors and stakeholders will be closely monitoring the bank's growth trajectory as it embarks on its next phase of expansion.