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IDFC: Post demerger financials - Views on News from Equitymaster
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IDFC: Post demerger financials
Nov 19, 2015

IDFC declared the second quarter results of financial year 2015-2016 (2QFY16). While income from operations grew by 1.1%, the NBFC has booked a loss during the quarter. Here is our analysis of the results.

Please note that this refers to the demerged NBFC arm of IDFC. The results are therefore not exactly comparable on YoY basis. The banking arm of IDFC, IDFC Bank, has recently got listed separately. Since IDFC Bank has just started operations its detailed P&L statements are yet to be declared.

We have also laid out our key takeaways from the discussion with the management post the demerger here.

Performance summary

  • Consolidated income from operations increased by a tepid 1.1% YoY in 2QFY16 on a 15% fall in the loan book post the demerger of the banking business. Post demerger, IDFC holds 53% stake in IDFC Bank, 75% stake in IDFC Asset Management Company, and 100% stakes in each of the IDFC Securities, IDFC Alternatives and IDFC Infrastructure Fund (IDF) subsidiaries. For 1HFY16, income from operations grew by 2.8% YoY.
  • Net interest margins (NIM) contracted to 3.1% in 2QFY16 from 3.8% in the year ago quarter mainly on account of income reversal due to higher slippages into NPAs.
  • Other income was lower by 75% YoY during 2QFY16. For 1HFY16, other income was lower by 98% YoY.
  • The cost to income ratio shot up to 28% in 2QFY16 as compared to 18% in the year ago quarter mainly due to bank related expenses. For 1HFY16, the cost-to-income ratio increased to 31% from 13% in the year-ago period. The bank expenses jumped to Rs 2.4 bn in 1HFY16 from Rs 380 m in 1HFY15.
  • The NBFC posted a loss of Rs 14.6 bn in 2QFY16 primarily due to an exceptional charge of Rs 26.4 bn booked during the quarter. This pertains to Rs 25 bn of one-time specific provisions against stressed assets created from specific reserves as well a one-time adjustment of Rs 1.4 bn for income reversal of unrealized income of stressed assets.
  • Capital adequacy ratio stands at a robust 24.7% at the end of September 2015 (Tier-1 ratio of 24.1%).
  • Net NPAs rose to 1% at the end of September 2015 (0.4% at the end of September 2014).
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