India’s IDFC FIRST Bank has announced plans to raise up to 75 billion rupees, equivalent to $877 million, through investments from affiliate firms of Warburg Pincus and the Abu Dhabi Investment Authority (ADIA). The bank will issue convertible shares to these investors, which, upon full conversion, will provide them with a combined 15% stake in the institution.

Currant Sea Investments B.V., an affiliate of Warburg Pincus, is set to invest approximately 48.76 billion rupees, securing a 9.8% stake in the bank. Meanwhile, ADIA’s unit, Platinum Invictus B 2025 RSC, will contribute about 26.24 billion rupees for a 5.10% stake, according to IDFC FIRST Bank’s statement.

IDFC FIRST Bank currently boasts a loan book of 2.31 trillion rupees. CEO V. Vaidyanathan expressed optimism that a 20% annual growth in this loan book is “very possible,” as the bank is considered a mid-tier institution starting from a low base. He highlighted that this capital raise is larger than anticipated, which will position the bank for its subsequent growth phase.

As part of the investment deal, Warburg Pincus will gain a seat on IDFC FIRST’s board. The capital influx will enhance the bank’s book value per share by 2.3% and increase its overall capital adequacy ratio to 18.9%, up from 16.1%. However, this plan is contingent on receiving regulatory and shareholder approvals.

In the latest financial quarter, IDFC FIRST Bank reported a 53% decline in net profit, primarily due to rising bad loans in its microfinance portfolio. Despite this, Vaidyanathan noted that excluding the microfinance segment, the bank’s asset quality remains stable. Analysts from Jefferies remarked that while the bank is performing well in retail loans and deposits, the microfinance sector poses challenges. Following this announcement, IDFC FIRST’s shares gained 0.5% in Mumbai trading.