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The recent toll waiver implemented by the Maharashtra state government has significantly impacted the financial performance of IDFC First Bank, resulting in a substantial loss for the second quarter of fiscal year 2025. The bank, which had provided finance against the toll receivables, was forced to make a provision of Rs 253 crore out of its earnings, ultimately leading to a 73% decline in net profit compared to the same period last year.
The toll waiver, announced on October 14, 2024, days before the election code of conduct came into effect, exempted light motor vehicles from paying tolls at five entry points into Mumbai. This directly affected MEP Infrastructure, the concessionaire responsible for toll collection, and subsequently impacted IDFC First Bank's investment in the infrastructure toll account. However, the bank expressed confidence in recovering these losses, indicating that future profits would be recognized based on toll collections and potential government compensation to the client.
Despite the toll waiver-related setback, IDFC First Bank's overall performance showcased positive growth in other key areas. The bank recorded a 21% increase in net interest income, reaching Rs 4,788 crore, demonstrating its ability to generate revenue from its core operations. Furthermore, the bank witnessed a significant surge in both deposits and advances, indicating strong customer confidence and business expansion. Deposits reached Rs 2,18,026 crore, a 32.4% increase year-on-year, while advances climbed to Rs 2,22,613 crore, a 21.5% increase.
While the toll waiver incident presented a temporary challenge, IDFC First Bank's CEO, V Vaidyanathan, emphasized the bank's robust core business drivers, highlighting its strong brand, technology, and high service levels as key factors contributing to growth. He also addressed the impact on the microfinance business, noting the implementation of insurance schemes and the bank's commitment to supporting this sector. Vaidyanathan reiterated the bank's focus on maintaining asset quality, with gross non-performing assets (NPAs) at 1.92% and net NPAs at 0.48%.
To further mitigate potential risks and ensure financial stability, the bank proactively established an additional provisioning buffer of Rs 315 crore for the microfinance segment. Additionally, IDFC First Bank raised Rs 3,200 crore in fresh equity capital from domestic institutional investors in July 2024, further strengthening its financial position. The bank's merger with its parent company, IDFC, in October 2024, added Rs 618 crore to its net worth, while reducing outstanding share count by 16.64 crore shares.
Source: IDFC First Bank takes Rs 253cr hit on Q2 profit because of Mumbai entry toll waiver