IDFC Special Situation September 2015

Here are my numbers and logic. Am assuming market values are high level approx. on P/BV and not DCF

1. IDFC’s standalone business book value is 2640 crores
2. IDFC Bank’s book value is 13,300 crores
3. Today’s valuation is approx. 22,600 crores (~162 crore shares * 140 market price) = tomorrow’s valuation (ignoring analyst’s who are projecting the value and not today’s price)
4. Tomorrow’s direct ownership of IDFC Bank (A) + IDFC’s share of IDFC Bank (B) + Rest of IDFC (C) should be 22,600 to IDFC’s today’s shareholders.
5. C = Rest of IDFC can be valued at 4000-6000 crores (fee driven business – 1.5 – 2.5 BV, a quick estimate, this can even be higher or lower – need to value the assets separately)
6. A+ B = 16,600 – 18,600 crores
7. B = A *.53 / .47 * .75 (53% is IDFC’s share, 47% is direct by share holders, and assume a 25% holding company discount) = ~ .85 A
8. 1.85 A = 16,600 – 18,600 -> A = 9,000 – 10,000 crores & B = 7,600 – 8,600 crores
9. IDFC should be valued = B + C = 11,600 – 14,600 crores, at a per share level 70-90 (162 Crore shares)
10. IDFC Bank shares would be valued at 55 – 60 (again A – 9000 – 10000 cores divided by 162 crore shares). Note am using the direct holding and direct ownership shares to calculate value.