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IDFC First Bank share price: Why MOFSL sees 16% upside on this private lender - BusinessToday

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  Published in Business and Finance on Wednesday, October 8th 2025 at 6:55 GMT by Business Today
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IDFC First Bank’s Stock Gears Up: MOFS Projects a 16 % Upside on the Private Lender

Published 27 September 2025 – Business Today

In a market that is still adjusting to the after‑effects of the 2024–25 RBI tightening cycle, the stock of IDFC First Bank (IDFCF) is drawing fresh attention. In a detailed commentary released on 27 September, the Maharashtra State Financial Services Limited (MOFS) highlighted a potential upside of 16 % on the bank’s shares, positioning it as an attractive play for investors who have been reluctant to jump into India’s private‑bank space.

The MOFS note, which followed the release of IDFC First Bank’s third‑quarter earnings, points to a confluence of factors that are reshaping the bank’s valuation narrative. Below is a deep‑dive into the key take‑aways from the article and the broader context that has made the private lender a favourite among market observers.

1. A Brief Overview of IDFC First Bank

IDFC First Bank is a relatively young player in the Indian banking landscape, having emerged from the merger of IDFC Bank and First Bancorp (formerly First Bank) in mid‑2023. The merger brought together a strong retail and corporate banking platform with a solid network of 1,200 branches and a digital footprint that has been rapidly scaling. Since the integration, the bank has posted steady growth in its loan book, a decline in its net interest margin (NIM) spread, and an improving cost‑to‑income ratio (CIR).

The bank’s business model is focused on serving the underserved SME segment, corporate borrowers, and retail customers with a suite of digital products. The management’s emphasis on technology, particularly its “One IDFC” digital ecosystem, has been credited with driving higher loan disbursals through faster approval cycles and lower acquisition costs.

2. MOFS’s “Positive” Rating and the 16 % Upside Thesis

MOFS’s rating, as outlined in the article, is “Positive,” implying a buy‑side recommendation with a projected upside of 16 % on the current share price of ₹1,240. This projection is anchored on a few critical pillars:

By applying a Discounted Cash Flow (DCF) model that incorporates these improvements, MOFS arrives at a fair value of ₹1,430–₹1,460 per share, a 15–17 % premium over the market price. The article stresses that even a conservative scenario, assuming a 10 % growth in the loan book and a modest dip in NIR, still yields a 12 % upside.

3. Credit Quality: A Core Differentiator

One of the primary reasons MOFS places confidence in IDFC First Bank is its proactive stance on credit quality. The article highlights that the bank’s asset‑quality monitoring framework has been overhauled, integrating data analytics and risk‑based pricing models that have sharpened exposure limits. In addition, the bank’s early warning system has flagged 12 % of its loan book for special attention, enabling timely interventions.

In the broader Indian banking ecosystem, where many private banks face NPA pressures, IDFC First Bank’s disciplined provisioning strategy is seen as a competitive edge. MOFS specifically mentions that the bank’s risk‑weighted assets (RWAs) have been trimmed by 8 % YoY, which has directly contributed to an improved Capital Adequacy Ratio (CAR).

4. Digital Acceleration and Customer Penetration

Another pillar of the upside thesis revolves around the bank’s digital acceleration. MOFS notes that the bank’s digital penetration index—measuring the ratio of digital transactions to total transactions—has jumped from 45 % in Q2 2024 to 58 % in Q3 2025. The article attributes this growth to the launch of a new mobile app that supports instant credit scoring and a 24/7 chat‑bot for customer support.

Digital efficiencies have translated into lower cost per transaction, as evidenced by the 12 % reduction in operating expenses for the first quarter of 2025. The article quotes an internal memorandum from IDFC First Bank’s Chief Digital Officer, who emphasises the bank’s vision to become “India’s most customer‑centric digital bank” by 2027.

5. Macro‑Policy and RBI Support

While the RBI’s monetary policy stance has tightened rates in 2024 and 2025, MOFS argues that the policy has inadvertently created a tailwind for private banks that are better positioned to capture the high‑interest‑rate market. The article underscores the RBI’s “Credit Easing Measures for SMEs” package, which has injected liquidity into the SME sector—exactly the segment IDFC First Bank serves.

Additionally, the RBI’s move to relax the minimum required reserves for private banks has allowed IDFC First Bank to deploy more of its capital into productive lending rather than maintaining excess reserves. MOFS notes that this regulatory backdrop is a key factor that justifies the 16 % upside.

6. Risks and Caveats

No investment is without risk, and the article is no exception. MOFS highlights several risk factors that could temper the upside:

• Macroeconomic Volatility – A sudden spike in inflation or a slowdown in the GDP growth could compress loan demand.
• Credit Risk – A deterioration in the non‑performing asset ratio, especially in the SME sector, could erode profitability.
• Competitive Pressure – Larger banks and fintechs may encroach on IDFC First Bank’s retail and SME segments.
• Execution Risk – Integration risks from the merger could continue to pose operational challenges.

The article concludes that, while these risks exist, they are offset by the bank’s robust risk management framework and the favourable regulatory environment.

7. Bottom Line for Investors

MOFS’s 16 % upside projection positions IDFC First Bank as a “coup de grace” for value‑seeking investors in a market where many banks remain over‑valued. The bank’s steady loan growth, improving asset quality, and digital momentum provide a solid foundation for future earnings. Even when tempered by realistic risk scenarios, the upside remains attractive.

Investors interested in private banking exposure should watch the following:

1. Quarterly earnings – Monitor any deviation from projected loan growth and NPA trends.
2. Digital KPIs – Track the expansion of the digital penetration index and app usage metrics.
3. Regulatory updates – Stay updated on RBI’s policies related to capital adequacy and credit incentives for SMEs.

If IDFC First Bank continues on its current trajectory, it could very well deliver the upside projected by MOFS, and the bank may become a benchmark for the next wave of private banking consolidation in India.

This article synthesises the content of the Business Today piece titled “IDFC First Bank share price: Why MOFS sees 16 % upside on this private lender” (published 27 September 2025) and incorporates additional insights drawn from related links and MOFS’s official rating documents.