You can buy IDFC at these levels
The sharp de-rating of Indian financials over the past quarter has seen the IDFC stock lose over 33 per cent in value to its current Rs 154 levels. With a business portfolio that spans infrastructure funding, private equity, investment banking and asset management, a portion of IDFC’s earnings are no doubt vulnerable to domestic slowdown as well as turbulent stock markets.
However, such a slowdown appears to be already priced into the stock’s valuations. At the current market price, IDFC trades at about 24 times its earnings and less than 4 times its book value for FY08, down from its peak valuations of 36 and 6 times, respectively. The company appears well placed to deliver a 30 per cent-plus growth in earnings over the medium term, making it an attractive ‘buy’ for investors with a three-year perspective.
IDFC has also recently acquired the mutual fund business of Standard Chartered AMC. StanChart’s strong performance record in both debt and equity, potential for manifold expansion in equity assets and the high scalability and investment returns offered by the AMC business, all suggest that this buyout would add a stable earnings stream to IDFC’s portfolio over the next 3 years.
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