Why IFCI Share Price is Rising

The last time we wrote about IFCI, there was a request saying we should also analyse its holding in Stock Holding Corporation which in turn is holding in NSE.

What better time to take the opportunity of the current situation and answer some burning questions of our readers...

But before we do that, you need to understand some current aspects about IFCI.

Because in the past 5 trading sessions, the stock price has shot up by almost 20%.

This takes its gains for 2024 so far to a whopping 85%!

Let's look at the reasons driving IFCI's stock price before we jump into the growth prospects, among other things.

Why IFCI Share is Rising

# Firm Turns Profitable After 7 Long Years!

The primary reason behind the current optimism comes from the fact that the government owned NBFC turned around in FY24 and posted a profit after seven consecutive years of losses.

Here's what the company's financials looked like before -

Financial Snapshot of IFCI

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	28,215	28,720	20,664	15,522	14,851
Growth (%)	-32%	2%	-28%	-25%	-4%
Operating Profit	11,722	14,423	-8,676	-5,128	7,429
OPM (%)	42%	50%	-42%	-33%	50%
Net Profit	-4,887	-2,304	-19,415	-18,313	-2,078
Net Margin (%)	-17%	-8%	-94%	-118%	-14%
ROE (%)	-8.5	-4.3	-44.5	-55.4	-3.9
ROCE (%)	4.6	6.9	-5.8	-4.7	6.8
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	3.1	2.5	3.1	2.5	1.8

Data Source: Ace Equity

The last time it had posted a profit was way back in FY16 when it reported earnings of Rs 3.8 billion.

But following the company's expansion into government and private corporate advisory segment, it has finally turned a corner.

The company swung to a profit of Rs 1.3 billion (bn) from a loss of Rs 2.7 bn in the year before.

IFCI also benefited from the implementation of the production-linked incentives (PLI) schemes of the Indian government.

Strong Growth Prospects

Since the company's portfolio spans across lending to diverse projects, including airports, roads, telecom, power, real estate, manufacturing, services sector, and other allied industries, investors were hoping that the company would be a strong turnaround candidate.

And right on... IFCI has turned around big time, and the future prospects look even brighter.

Due to liquidity constraints, IFCI halted its lending operations since FY22. But in 2023, IFCI's net losses reduced driven by recoveries and impairment reversal.

All it needed was capital infusion from the Government of India that could possibly turn around its operations.

In April this year, the government infused Rs 5 bn into IFCI by subscribing to its equity shares on a preferential basis.

Following this capital infusion, the government now holds a 71.72% stake in the company.

In the past, the government has helped the company by infusing funds. For instance, it had previously infused Rs 1 bn in IFCI in September 2022.

Over the years, rising NPAs and consistent yearly losses have remained a cause for concern for investors in IFCI.

But in the recent past, IFCI has been flawless when it comes to debt repayments while it has also made recoveries from non-performing advances (NPAs) and divest some of its non-core assets.

Apart from managing more than 10 of the government's production-linked incentives (PLI) schemes, IFCI was also selected to manage and help streamline the Rs 100 billion (bn) FAME-II scheme.

IFCI's Holding in Stock Holding Corporation

IFCI has six subsidiaries -

• IFCI Factors
• IFCI Venture Capital Funds
• IFCI Financial Services
• IFCI Infrastructure Development
• MPCON
• Stock Holding Corporation of India

Now, in the recent past, there have been rumours going around IFCI's reverse-merger with one of its subsidiaries.

This topic is tabled as part of a rescue plan for India's oldest finance institution.

According to reports, IFCI may most likely be merged with its subsidiary Stock Holding Corporation of India (SHCIL).

Stock Holding is among India's largest depository participants, the largest premier custodian in terms of assets under custody, and the highest profit-generating entity under IFCI's fold.

According to its annual report for FY23, the company holds shares in LIC as well as the unlisted National Stock Exchange of India (NSE).

As and when NSE decides to list on the exchanges, IFCI could be an indirect beneficiary via its holding in Stock Holding which has shares of NSE.

Back in 2019, IFCI had already realised some Rs 8.1 billion from the divestment of its 2.44% stake in NSE.

How IFCI Share Price has Performed Recently

In the past 5 days, IFCI share price has shot up by 18%!

That takes its year to date (YTD) gains to over 85%. IFCI is on its way to churn multibagger returns in a little over 4 months.

IFCI has a 52-week high of Rs 71.7 touched on 8 February 2024 and a 52-week low of Rs 11 touched on 30 May 2023.

In the past one year, shares of the company have rallied over 330%.

Here's a table comparing IFCI with its peers -

Comparative Analysis

Company	IFCI	MAS Financial	Satin Credit	Tourism Finance	Ujjivan Fin.
ROE (%)	-3.4	14.4	0.3	9.9	42.1
ROCE (%)	6.8	11.5	8.4	10.5	10.7
Latest EPS (Rs)	0.4	15.4	39.5	9.2	67.4
TTM PE (x)	126.3	19.6	6.5	19.2	8.8
TTM Price to book (x)	2.6	2.8	1.2	1.6	1.8
Dividend yield (%)	0.0	1.2	0.0	1.4	0.9
Industry PE	11.2
Industry PB	2.4

Data Source: Ace Equity

About IFCI

Erstwhile Industrial Finance Corporation of India, IFCI is a state-owned non-banking finance company established to cater to the long-term finance needs of the industrial sector.

The company's financing activities cover various kinds of projects such as airports, roads, telecom, power, real estate, manufacturing, services sector, and other allied industries.

To point out some of IFCI's big projects, it has financed projects including Adani Mundra Ports and GMR Goa International Airport.

To know more, check out IFCI's financial factsheet.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...