X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
IDBI: Asset quality concerns - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 24, 2001

    IDBI: Asset quality concerns

    IDBI, India's largest development financial institution with an asset base of over Rs 721 bn (in FY00) is expected to declare its annual results next week. We take a look at its past performance and try and evaluate its future.

    IDBI had reported a dismal financial performance for the nine months ended December '00. IDBI's profits dropped by 15% while the topline showed a marginal growth of 2%.The decline in net profits was mainly due to 44% fall in other income. This was attributed to lower capital gains on sale of investments (Rs 769 m against Rs 1,998 m in the previous period) due to depressed state of capital markets. On the other hand a marginal growth in topline was the result of fall in sanctions and disbursements of the institution. During the first nine months of FY01 both sanctions (Rs 193 bn) and disbursements (Rs 105 bn) were lower by 1.8% and 4.5% respectively.

    (Rs m) 9m FY00 9m FY01 Change
    Income from Operations 57,179 58,268 1.9%
    Other Income 1,876 1,049 -44.1%
    Interest & Depreciation 47,451 49,723 4.8%
    Operating Profit (EBDIT) 9,728 8,545 -12.2%
    Operating Profit Margin (%) 17.0% 14.7%  
    Other Expenses 1,919 1,937 0.9%
    Depreciation 1,567 1,725 10.1%
    Profit before Tax 8,118 5,932 -26.9%
    Provisions and write offs 1,050 500 -52.4%
    Tax 700 -  
    Profit after Tax/(Loss) 6,368 5,432 -14.7%
    Net profit margin (%) 11.1% 9.3%  
    Number of shares (eoy) 660 652.8#  
    Diluted Earnings per share* 13.0 11.1  
    *(annualised)      
    P/E (at current price)   2.3  
    # Including bonus in ratio of 3:5      

    Infrastructure finance constituted 36% of total sanctions and 21% of total disbursements. Power and telecom sector accounted for major demand from funds in this sector. Industry wise the share of electricity generation at 26.6% was the highest in the overall sanctions, followed by services 14.7%, chemicals 9.5%, petrochemicals 6.7% and telecom 6.3%. These five industries together accounted for the balance 64% of total sanctions and 48% of total disbursements.

    IDBI's asset portfolio is well diversified across industries and clients. However, the recessionary conditions in the economy over the past few years have affected its asset quality. Its net NPAs to advances ratio increased to 13.4% in FY00 from 12% in FY99. Improvement in the economic conditions leading to positive change in financial condition of many industries (specially commodities) could aid the growth prospects of IDBI. The key challenge however remains to achieve an incremental growth without compromising the asset quality.

    IDBI's earnings are under constant pressure due to deteriorating asset quality, lower interest spread, and relatively low income diversity. Although, the institution is moving towards fee based income by entering into mutual funds and insurance segment, in the near term earnings are likely to be lower.

    At the current market price of Rs 25, IDBI trades at a P/E multiple of 2 times its 9 months FY01 annualised earnings and price to book value ratio of 0.2x. The institution has declared bonus in ratio of 3:5 during the December quarter. IDBI's comparatively lower valuations than its peers (ICICI and HDFC) are due to concern over quality of its assets and inability to sustain the growth by venturing into new areas.

     

     

    Equitymaster requests your view! Post a comment on "IDBI: Asset quality concerns". Click here!

      
     

    More Views on News

    HDFC: Red Flag in Developer Loans (Quarterly Results Update - Detailed)

    Aug 10, 2017

    HDFC starts FY18 on robust loan growth but asset quality slips on increased exposure to developer loans.

    Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds (Quarterly Results Update - Detailed)

    Jun 22, 2017

    Demonetisation led slowdown coupled with shift to stringent bad loan norms keep Shriram Transport Finance on a slow wicket.

    Power Finance Corp: Alignment with RBI Norms Knocks Down FY17 Earnings (Quarterly Results Update - Detailed)

    Jun 14, 2017

    Power Finance Corporation earnings hit by RBI mandated higher provision on state government power generation projects where the recovery continues to be 100%.

    IDFC: Ends FY17 on a Healthy Note (Quarterly Results Update - Detailed)

    May 30, 2017

    IDFC regains its tempo in FY17 post the demerger of the banking business.

    HDFC: Conservative Provisioning tempers down FY17 earnings (Quarterly Results Update - Detailed)

    May 9, 2017

    HDFC ends FY17 on a tepid note as it remains conservative on the asset quality front.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    IDBI BANK SHARE PRICE


    Aug 23, 2017 (Close)

    TRACK IDBI BANK

    • Track your investment in IDBI BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    IDBI BANK - WELLS FARGO COMPARISON

    Compare Company With Charts

    COMPARE IDBI BANK WITH

    MARKET STATS