IDBI: Dismal performance - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

IDBI: Dismal performance

Jul 29, 2002

IDBI's financials continued to bleed during the first quarter of FY03. The financial institution has reported a steep 79% decline in profits and 23% drop in interest income. Low credit offtake and pressure on margins have hit IDBI's first quarter performance.

(Rs m)1QFY021QFY03Change
Income from Operations 21,570 16,650 -22.8%
Other Income 440 190 -56.8%
Interest Expenses 16,030 14,420 -10.0%
Net interest income 5,540 2,230 -59.7%
Other Expenses 1,420 1,120 -21.1%
Operating Profit 4,120 1,110 -73.1%
Operating Profit Margin (%)19.1%6.7% 
Provisions and Contingencies 2,640 970-63.3%
Profit before Tax 1,920 330 -82.8%
Tax 100 (50)-150.0%
Profit after Tax/(Loss) 1,820 380 -79.1%
Net Profit Margin (%)8.4%2.3% 
No. of Shares (m) 653.0 653.0  
Diluted Earnings per share*11.12.3 
P/E ratio 7.7 
*(annualised)   

In FY02 itself IDBI's sanctions and disbursements fell by 44% and 36% respectively. Loan disbursements seem to have been further impacted in 1QFY03. IDBI has adopted a strategy of extending assistance selectively to good corporates under non-project finance. Share of non-project finance in the overall assistance increased to 64% in FY02 from 53% in FY01. The competitive business environment and weak investment demand has impacted business growth and profitability of IDBI's operations in recent years. It has formulated its short and long term strategy to reposition itself in the new business environment. The short-term strategy focuses on improvement of asset quality, business diversification, reduction of costs, and better risk management practices. Over the longer term IDBI wishes to convert itself into a Universal Bank. However, it is yet to find a bank for the reverse merger.

During the quarter, IDBI's other income declined by over 50% as during 1QFY02 other income was higher on account of capital gain of Rs 1 bn on sale of 50 m shares of SIDBI. The previous quarter result also included Rs 600 m dividend from SIDBI, which is expected to come in the second quarter of this year. Sharp fall in both net interest income and other income increased IDBI's cost to income ratio to 46% from 24% in 1QFY02. Its tax provision in the current quarter declined due to deferred tax credit of Rs 100 m.

However, its provisions for non-performing assets was lower by 63% during the June quarter. In FY02, IDBI made accelerated write-off of bad and doubtful debts amounting to Rs 25 bn by drawing the equivalent amount from special reserve. This increased its provisions to gross NPA ratio to 54% and NPAs to total loan assets ratio came down to 11.7%.

At the current market price of Rs 18, IDBI is trading at a P/E of 8x 1QFY03 annualised earnings. The institution's net NPAs are more than its networth. Consequently, its book value of Rs 102 would actually reduced to nil, if one were to adjust the entire net NPAs from its reserves. Although IDBI is initiating measure to clean up its books and improve asset quality, it would take atleast 2-3 years before it starts making quality growth in earnings.

Equitymaster requests your view! Post a comment on "IDBI: Dismal performance". Click here!

  

More Views on News

IDBI BANK Announces Quarterly Results (2QFY21); Net Profit Up 109.4% (Quarterly Result Update)

Oct 26, 2020 | Updated on Oct 26, 2020

For the quarter ended September 2020, IDBI BANK has posted a net profit of Rs 3 bn (up 109.4% YoY). Sales on the other hand came in at Rs 47 bn (down 9.8% YoY). Read on for a complete analysis of IDBI BANK's quarterly results.

IDBI BANK Announces Quarterly Results (4QFY20); Net Profit Up 102.8% (Quarterly Result Update)

Jun 1, 2020 | Updated on Jun 1, 2020

For the quarter ended March 2020, IDBI BANK has posted a net profit of Rs 1 bn (up 102.8% YoY). Sales on the other hand came in at Rs 56 bn (up 2.5% YoY). Read on for a complete analysis of IDBI BANK's quarterly results.

CAMS IPO: Should You Apply? (IPO)

Sep 18, 2020

Does the company having 70% market share of the mutual fund registrar business have sound prospects?

More Views on News

Most Popular

Stocks that Could Shine More than Gold After Diwali (Profit Hunter)

Nov 17, 2020

If the markets become volatile over the next few months, do this.

Not Infosys or Wipro. India's Next Wealth Creators Could Be Drone Stocks (Profit Hunter)

Nov 25, 2020

India's drones directorate signals the next big defence tech multibaggers.

How the New Margins Will Impact You (Fast Profits Daily)

Nov 25, 2020

The new rules on margins will come into effect from 1st December. Are you ready?

How to Build the Best Trading System (Fast Profits Daily)

Nov 20, 2020

In this video, I'll show you how to make the best trading system.

An Eraser and Some Pencils (The Honest Truth)

Nov 17, 2020

Ajit Dayal on the road ahead for the world after covid.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

IDBI BANK SHARE PRICE


Nov 27, 2020 (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 8-QTR ANALYSIS

COMPARE IDBI BANK WITH

MARKET STATS