MOSL: CAPITAL FIRST (Buy)-Second innings-INR37b PAT, 14%+ RoE for the combined entity in 5-6 years
Capital First: Second innings; INR37b PAT, 14%+ RoE for the combined entity in 5-6 years
(CAFL IN, Mkt Cap USD1.0b, CMP INR655, TP INR960, 47% Upside, Buy)
- We recently met the management of Capital First (CAFL). The proposed merger of IDFC Bank (IDFCB) with CAFL is likely to fructify by mid-FY19, creating a financial services entity with total assets of ~INR1.5t.
- Over the next 5-6 years, the combined entity is likely to undergo a huge transformation – from a primarily wholesale-focused bank to a retail-focused bank with meaningful CASA deposit franchise.
- Currently, CASA deposits at IDFCB amount to merely INR43b – 4% of total liabilities. Bulk of the CASA has come in the past four quarters (post demonetization). The management’s priority post-merger will be scaling up the CASA franchise.
Over the next six years (five years post-merger), we expect overall customer assets to reach INR1.9t and PAT to reach INR37b. This would imply 26% PAT CAGR for the consolidated entity over FY19-24. We believe the merged entity is well-capitalized to sustain such strong growth. We have a BUY rating on CAFL, with a TP of INR960
Capital First Ltd. Capital First Limited is an India-based financial company, which is focused on providing debt financing to micro, small and medium enterprises (MSMEs) and Indian consumers. The Company's products include personal loans, business loans, loan against property, two wheeler loans, pre-owned car loan and insurance. The Company also provides other credit granting services. The Company provides financing for various purposes, such as business expansion, loans for plant and machinery, office furniture, display panels, office automation (such as personal computers), laptops and printers. The Company offers consumer durable loans for digital products, such as cameras and accessories, laptops and desktops, and mobiles and tablets, and non-digital products, such as television, refrigerator, air conditioner, microwave, washing machine and audio. The Company, as a corporate agent, also distributes life insurance products and general insurance products offered by insurance companies.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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