IDFC First Bank Fraud; KPMG to Investigate

IDFC First Bank has appointed KPMG to investigate the ₹590 crore investment scam in Haryana. The bank has decided to conduct a forensic audit immediately. Meanwhile, analysts note that the bank’s share price has fallen to levels that appear to reflect a worst-case scenario following the fraud news.

After the ₹590 crore fraud was uncovered in Haryana, the bank’s share price declined by around 16%, resulting in a market capitalisation loss of nearly ₹12,000 crore.

Analysts believe these concerns may persist for some time. However, they also point out that the Haryana incident is not significant enough to derail the bank’s medium- and long-term prospects. The stock is currently trading at 1.34 times its price-to-book value, compared to its five-year average of 1.6 times. This indicates a 19% de-rating from its historical valuation levels.

The bank may need to make 100% provisioning in the current quarter due to the Haryana episode. In that case, it could report only a small profit in Q4, and there is even a possibility of a marginal loss. The bank had reported a profit of ₹503 crore in Q3.

As of 31 December, IDFC First Bank’s net assets stood at ₹41,000 crore. A mitigating factor is that the maximum potential impact of the ₹590 crore fraud amounts to less than 2% of the bank’s net assets.

Some analysts caution that if the fraud amount is not fully recovered, the bank’s Q4 pre-tax profit could decline by up to 56%. However, they also highlight the bank’s strong 93% loan-to-deposit ratio as a positive factor. Motilal Oswal estimates that the compound annual growth rate (CAGR) for the bank could reach 22% during FY26–FY28. If this growth materialises, analysts believe there will be no major impediments to the smooth functioning of loan disbursements.

Disclaimer

This information is based solely on currently available data. Investment decisions should be made only after consulting a SEBI-registered financial adviser.