IFCI: In a clean-up mood - Views on News from Equitymaster

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IFCI: In a clean-up mood

Feb 13, 2002

IFCI once again reported grim financial performance with nine months cumulative losses mounting to Rs 4.9 bn. The institutions' income from operations also declined by 19% YoY, during the period April - December 2001.

(Rs m)3QFY013QFY02Change9m FY019m FY02Change
Income from Operations 6,948 6,382 -8.1% 21,207 17,124 -19.3%
Other Income 15 172 1027.0% 44 202 359.5%
Interest Expenses 6,342 6,039 -4.8% 19,023 18,168 -4.5%
Net interest income 606 343 -43.5% 2,184 (1,044) -
Other Expenses 281 246 -12.7% 833 784 -5.9%
Operating Profit 325 97 -70.2% 1,351 (1,828) -
Operating Profit Margin (%)4.7%1.5%6.4%-10.7%
Provisions and Contingencies 270 750178.3% 1,013 3,270222.6%
Profit before Tax 71 (481) 382 (4,896) -
Tax - - - - -
Profit after Tax/(Loss) 71 (481) 382 (4,896) -
Net Profit Margin (%)1.0%-7.5%1.8%-28.6%
No. of Shares (m) 639.5 638.7 639.5 638.7
Diluted Earnings per share*0.4-3.00.8-10.2
*(annualised)

Higher operating expenses (mainly staff cost) resulted in operating losses for the first nine months of FY02. IFCI's cost to income ratio at 48% is one of the highest amongst its peers in the sector. Stiff pressure on interest cost, which declined less than proportionately compared to fall in interest income also contributed to operating loss.

During the quarter, the institution received funds from Government of India and LIC amounting to Rs 6 bn cumulatively. This fund infusion would provide the institution with adequate capital and liquidity to conduct its business operations. SBI and IDBI are yet to contribute their part of Rs 2 bn each to bail out IFCI from its financial woes.

IFCI made higher provisions for bad losses during the first nine months of FY02 to increase the provision coverage ratio, which stood at a mere 4% in FY01. Consequently, its net losses sky rocketed to Rs 4.9 bn for the period ended December 2001.

IFCI's stock valuation has seen sharp erosion in the last one year. From an average price of Rs 8.5, the stock currently trades at Rs 4. It will take at least 3-4 years to IFCI to restructure its current loans, provide adequate amount for non-performing assets and start generating profits. These factors are already reflected in its stock price, which lacks buying interest.

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