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IDFC First Bank, formerly IDFC Bank has changed its name post merger with Capital First. The merger is highly synergistic and provides low cost funding to erstwhile Capital First’s retail lending business and diversifies erstwhile IDFC Bank’s predominantly wholesale lending business with small ticket loans. Initial retailisation trends are very positive, however, further souring of loans of erstwhile IDFC Bank, well beyond expectations have impacted near term profit. Management had guided for completion of provisioning cycle and significantly lower credit cost going forward, however, operations got hit by Covid-19 pandemic and risks of spike in NPAs has increased. The long term is promising and valuations attractive; which is why we have a over weight rating on the stock – 28-05-2020 Price: 20.30 Rating: Over Weight Recommendation: Buy

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RATING RATIONALE

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