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ICICI: Disappointing performance

Jan 25, 2001

ICICI's net profits for 3QFY01 declined by 7% despite a 5% rise in the revenues. There was a substantial drop in other income apart from a reduction in operating margins. Other income of ICICI witnessed a negative growth due to lower capital gains.

(Rs m) 3QFY00 3QFY01 Change
Income from Operations 21,281 22,349 5.0%
Other Income 246 198 -19.5%
Interest & Depreciation 16,522 17,585 6.4%
Operating Profit (EBDIT) 4,759 4,764 0.1%
Operating Profit Margin (%) 22.4% 21.3%  
Other Expenses 1,995 2,184 9.5%
Profit before Tax 3,010 2,778 -7.7%
Tax 295 248 -15.9%
Profit after Tax/(Loss) 2,715 2,530 -6.8%
Net profit margin (%) 12.8% 11.3%  
Diluted number of shares 785 785  
Diluted Earnings per share* 13.8 12.9  
*(annualised)      
P/E (at current price) 5.4 5.8  

During the quarter ICICI replaced a significant proportion of its preference shares by relatively lower cost borrowings consequent to an increase in the distribution tax rate. The interest on borrowings hit the operating margins of the institution.

The other expenses were higher on the back of a 55% rise in staff cost and an increase in provisioning requirement on non performing assets. An additional provision of Rs 440 m was consequent to the revision of the RBI's provisioning guidelines. Accordingly, sub-standard assets are to be classified as doubtful assets after 18 months of an asset being classified as NPA instead of 24 months earlier.

At the current market price of Rs 95, ICICI trades at a P/E multiple of 6 times its 3QFY01 annualised earnings. We have projected 12% interest income growth and flat profit growth in the current year. However, we have to revise our projections in the light of lower other income and a higher provision on substandard assets. .

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