IFCI: Losses scale new highs - Views on News from Equitymaster

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IFCI: Losses scale new highs

Jul 3, 2002

IFCI's losses widened in the fourth quarter, inflating the total loss for FY02 to Rs 8.8 bn. A steep decline in interest income and pressure on interest margins took toll on the company's performance.

(Rs m)4QFY014QFY02ChangeFY01FY02Change
Income from Operations 7,592 5,062 -33.3% 28,799 22,185 -23.0%
Other Income 61 100 63.9% 105 301 187.9%
Interest Expenses 6,178 5,767 -6.7% 25,201 23,934 -5.0%
Net interest income 1,414 (705) - 3,598 (1,749) -
Other Expenses 530 300 -43.5% 1,363 1,083 -20.5%
Operating Profit 884 (1,005) - 2,235 (2,832) -
Operating Profit Margin (%)11.6%-19.9% 7.8%-12.8% 
Provisions and Contingencies 3,946 3,046-22.8% 4,959 6,31627.4%
Profit before Tax (3,001) (3,951)31.7% (2,619) (8,847) -
Tax 40 - - - - -
Profit after Tax/(Loss) (3,041) (3,951)29.9% (2,619) (8,847)237.8%
Net Profit Margin (%)-40.1%-78.1% -9.1%-39.9% 
No. of Shares (m) 638.7 638.7   638.7 638.7  
Diluted Earnings per share*-19.0-24.7 -4.1-13.9 
*(annualised)      

Higher operating expenses (mainly staff cost) resulted in operating losses for FY02. IFCI's cost to income ratio at 48% (for the first nine-months of FY02) 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, Government of India and LIC have released Rs 4 bn and Rs 20 bn respectively to IFCI in the form of 20 year convertible debentures, being eligible for Tier II Capital. This fund infusion of Rs 24 bn would provide IFCI with adequate capital and liquidity to conduct its business operations.

IFCI made higher provisions for bad losses in FY02 to increase the provision coverage ratio, which stood at a mere 4% in FY01. Consequently, its net losses sky rocketed to Rs 8.8 bn for the year ended March 2002. This is the highest amount of losses declared by IFCI in the last five years, wiping out 67% of its networth. If we were to exclude preference shares of Rs 4.3 bn, networth would become zero.

IFCI's stock soared by nearly 60% in the last four months due to fresh fund infusion by the government and other institutions. The stock is currently trading at Rs 6.4 per share. However, 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. IFCI's future stock valuations depend on its successful implementation of business revival plans.

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1 Responses to "IFCI: Losses scale new highs"

megharaj Rajur

Jan 10, 2010

i have 1700 ifci shares i bought at rate of 54Rs shill i hold it for some time or not

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