ICICI: Deferred tax spoils the show - Views on News from Equitymaster

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ICICI: Deferred tax spoils the show

Jul 27, 2001

ICICI reported better than expected financial performance in the first quarter of FY01. ICICI's earnings rose by 14%, while growth in topline was an impressive 13%. The institution also maintained its operating margins at 22.6%.

(Rs m)1QFY011QFY02Change
Income from Operations 20,990 23,730 13.1%
Other Income 380 360 -5.3%
Interest & Depreciation 16,260 18,360 12.9%
Operating Profit (EBDIT) 4,730 5,370 13.5%
Operating Profit Margin (%)22.5%22.6%
Other Expenses 830 780 -6.0%
Profit before Tax 4,280 4,950 15.7%
Provisions and write offs 1,150 1,090 -5.2%
Tax 260 600 130.8%
Profit after Tax/(Loss) 2,870 3,260 13.6%
Net profit margin (%)13.7%13.7%
Number of shares (eoy) 785.3 785.3
Diluted Earnings per share* 14.6 16.6
*(annualised)
P/E (at current price) 3.7

ICICI's topline growth was boosted by over 68% jump in fee based income. The institution's initiatives to frequently launch new products with the latest technology contributed to higher growth in fee income.

ICICI's fund based income too, grew by 10%. This is relatively good considering the general slowdown in the credit offtake by corporates and limited project finance opportunities. The newly created Government and Institutions Group (GIG), which offers wide ranging services to the public sector undertakings, accounted for 13% of ICICI's disbursals for the quarter. ICICI's capital adequacy ratio at 15.1% as on June 30, 2001 was comfortable and would supplement its rapid future growth.

ICICI's disbursals in 1QFY02 grew by a marginal 6%. However, its retail finance disbursements doubled to Rs 11.4 bn and now account for 13% of its retail assets. Disbursals to 'A' rated clients accounted for 92% of ICICI's total disbursements during the quarter. Its net NPA ratio came down to 5.1% in 1QFY02 (from 5.2% in FY01). During the quarter, ICICI restructured assets aggregating Rs 14.4 bn and made a provision of Rs 320 m against these assets.

During the quarter, ICICI unlocked its value in ICICI Eco-Net Fund in favour of Compaq for a consideration of US$ 4 m (approx. Rs 190 m). ICICI made a capital gain of Rs 110 m on the transaction.

The institution's tax provision was substantially higher as a result of provision for deferred tax liability.

At the current market price of Rs 62 ICICI is trading at a P/E of 5x and Price/Book value ratio of 0.6x. ICICI's first quarter performance was commendable considering the downturn in economic activity. The institution is expected to maintain its performance for the full year.

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