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ICICI's profits hit by low other income

Oct 23, 2000

ICICI's net profits for the 2QFY01 declined by 9% due to a substantial drop in other income. The decline in other income was due to a capital loss of Rs 19 m ( capital gain of Rs 75 m in 2QFY00) and lower dividend income from ICICI Securities Ltd.

(Rs m) 2QFY00 2QFY01 Change
Income from Operations 19,170 21,810 13.8%
Other Income 1,380 60 -95.7%
Interest & Depreciation 15,820 17,140 8.3%
Operating Profit (EBDIT) 3,350 4,670 39.4%
Operating Profit Margin (%) 17.5% 21.4%  
Other Expenses 620 970 56.5%
Provisions & write-offs 1,010 990 -2.0%
Profit before Tax 3,100 2,770 -10.6%
Tax 320 230 -28.1%
Profit after Tax/(Loss) 2,780 2,540 -8.6%
Net profit margin (%) 14.5% 11.6%  
Diluted number of shares 785 785  
Diluted Earnings per share* 14.2 12.9  
P/E (at current price) 5.3 5.8  

ICICI's approvals and disbursements during the half year ended September 2000 registered a growth of 31.5% and 51.7% respectively. ICICI's healthy capital adequacy ratio of 16.9% will enable it to grow its assets base further. The institution has restructured its loan portfolio during the year. Accordingly disbursements to manufacturing sector declined to 11% of total loans (14% in 1HFY00) and corporate finance increased to 73% (71% in 1HFY00).

The institution has also increased its retail thrust with 87 fully operational ICICI centres, covering 75 cities. It now offers automobile finance loans, home loans, consumer durable loans, personal loans and credit cards. In an endeavour to consolidate its position as a one stop financial services provider, ICICI has recently tied up with Prudential of the UK for life insurance products and Lombard of Canada for non-life insurance products.

ICICI's lower market valuations are due to its higher non performing assets. Although its net NPA ratio as on September 2000 declined to 7.3% (from 7.6% in March 2000), it is higher compared to HDFC's 0.9%. Textile, manmade fibres and steel industry contributes highest to total NPAs.

At the current market price of Rs 74, ICICI trades at a P/E multiple of 6 times its 2QFY01 annualised earnings and 4 times its FY01 projected earnings. We have projected 15% earnings growth and 22% operating income growth in the current year. However, the growth rate is expected to slow down due to low other income and higher provision on substandard assets (according to revised RBI guidelines substandard assets are to be classified as doubtful assets after 18 months of an assets being classified as NPA instead of 24 months earlier).

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