Dismal growth in industrial production and a slowdown in demand for project finance continued to hit IDBI's financial performance. IDBI's interest income declined marginally in the December quarter and earnings dropped by 77%.
Income from operations
Net interest income
Operating Profit Margin (%)
Provisions and contingencies
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares
Diluted Earnings per share*
IDBI's net interest income jumped by 40% thanks to reduction in interest cost. The institution has refinanced its high cost debt by raising funds at lower cost. Its operating expenses also declined by 2% during the quarter. Consequently, IDBI's cost to income ratio declined to 33% from 43% in 3QFY01. Reduction in interest cost and other expenses escalated its operating profits by 81%.
The institution's other income declined by 46% in the December quarter. This coupled with higher provisions for non-performing assets trimmed IDBI's earnings. Year to date, IDBI has provided Rs 6 bn on account of provisions for bad loans. IDBI had not made any provision in FY01 and consequently its net NPA ratio was on the higher side at 14.2%. In FY02 the institution's net NPA ratio is expected to be around 13.7% with its efforts to increase provision amount quarter over quarter.
At the current market price of Rs 15, IDBI is trading at adjusted Price/Book value ratio of 1.8x FY02 projected earnings. IDBI's net NPAs account for 94% of its networth. The institution is taking steps to clear accounts by making higher provisions. However, it will take atleast 5-6 years for IDBI to increase its provision coverage to 50%. Until then its earnings are likely to remain depressed.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407