IFCI reported loss of Rs 278 m for the first quarter ended June 2001 on the back of a sharp decline in operating margins and a drop of 9% in income from operations.
Income from Operations
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Provisions & contingencies
Profit after Tax/(Loss)
Net profit margin (%)
Number of shares (eoy)
Diluted Earnings per share
IFCI's operating margins had risen impressively to 18.6% in 4QFY01. However, during the June quarter OPM were just 3.5%. The institution's high cost of borrowing is responsible for such a sharp drop in margins.
IFCI's operating expenses continued to rise in 1QFY02 despite a downturn in the business volume. This further contributed in accelerating the net losses of the institution.
IFCI had appointed an expert committee in FY00 to restructure its financial health and to resolve the problems of bad loans. The committee projected net profits of Rs 5.3 bn by the end of FY07. This will be achieved by aggressive NPA recovery plan. In FY00, the management had planned to reduce the NPA level by at least Rs 5 bn per year over the next 3 years. Consequently, higher provisions were made in FY01 and the same trend continued in 1QFY02 despite losses.
In order to shore up its capital adequacy ratio which stood at just 6.2% as on March 2001, IFCI requires additional capital of Rs 10 bn. IFCI is in advanced talks with its institutional shareholders to finalise modalities for the infusion of Rs 6 bn capital as part of the Rs 10 bn recapitalisation package cleared by the Government earlier. It will receive the balance Rs 4 bn from the government in the next 10 days. This restructuring plan is expected to assist IFCI in improving its deteriorating networth.
At the current market price of Rs 3, the stock is trading at a Price/Book value ratio of 0.3x. Its networth in FY01 deteriorated by over 20% to Rs 16 bn due to mounting losses.
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