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PFC: Depressed earnings, High Dividends in FY16 - Views on News from Equitymaster
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PFC: Depressed earnings, High Dividends in FY16
Jun 14, 2016

Power Finance Corporation (PFC) declared its results for the fourth quarter of financial year 2015-16 (4QFY16) and full year FY16. The institution has reported a flat 0.8% YoY growth in net interest income and 19% YoY fall in net profits.

Performance summary
  • Interest Income grew by 3.4% YoY during 4QFY16 on the back of healthy 9% YoY growth in advances. For FY16, interest income grew by a robust 9.8% YoY.
  • While net interest incomes in 4QFY16 remained almost flat due to faster rise in interest expended, it has grown by a healthy 13% in FY16.
  • Net interest margins (NIMs) contracted by 0.5% in 4QFY16 on a steeper fall in yield on assets. But for FY16, NIMs were maintained at 4.9%.
  • Net profits fell by 19.3% in 4QFY16 due to a 114% jump in provisions. For FY16, profits grew by a mere 2.6% YoY.
  • Net NPA to advances ratio more than doubled to 2.55% at the end of 4QFY16, compared to 0.93% in 4QFY15.
  • Capital adequacy ratio (CAR) stands at healthy 20.27% of which Tier I is 17.07% as at the end of 4QFY16.
  • The NBFC has recommended a final dividend of Rs 0.6 per share which along with the interim dividend gives a total dividend of Rs 13.9 per equity share of face value of Rs 10 per share. At the current price level, this translates into a dividend yield of 8.6%.

    Standalone Financial Performance Snapshot
    Rs (m) 4QFY15 4QFY16 Change FY15 FY16 Change
    Interest Income 64,250 66,450 3.4% 248,280 272,590 9.8%
    Interest expended 38,810 40,800 5.1% 149,570 160,910 7.6%
    Net Interest Income 25,440 25,650 0.8% 98,710 111,680 13.1%
    Net interest margin 4.91% 4.43% 4.93% 4.94%
    Other Income -40 1,140 150 1,350 800.0%
    Operating expense 240 370 54.2% 2,170 2,930 35.0%
    Provisions and contingencies 2,770 5,930 114.1% 8,440 17,060 102.1%
    Profit before tax 22,390 20,490 -8.5% 88,250 93,040 5.4%
    Extraordinary items -390 -790 102.6% -4,470 -2,440 -45.4%
    Tax 6,390 7,110 11.3% 24,190 29,470 21.8%
    Effective tax rate 28.5% 34.7% 27.4% 31.7%
    Profit after tax/ (loss) 15,610 12,590 -19.3% 59,590 61,130 2.6%
    Net profit margin (%) 24.3% 18.9% 24.0% 22.4%
    No. of shares (m) 1,320
    Book value per share (Rs)* 242.8
    P/BV (x) 0.7

    * (Book value as on 31st March, 2016)

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