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Power Finance Corp: Interest income falls on muted credit offtake - Views on News from Equitymaster
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  • Nov 23, 2016 - Power Finance Corp: Interest income falls on muted credit offtake

Power Finance Corp: Interest income falls on muted credit offtake
Nov 23, 2016

Power Finance Corporation (PFC) declared its results for the second quarter of financial year 2016-17 (2QFY17). The institution has reported a 2.5% YoY fall in net interest income and 10.4% YoY rise in net profits.

Performance summary
  • Loan sanctions grew by a robust 58% YoY in 2QFY17 and a still better 66% YoY in 1HFY17.
  • However, loan disbursements have been at a much slower pace- rising 45% YoY and 26% YoY in 2QFY17 and 1HFY17, respectively. Loan assets grew by a muted 5% YoY at the end of September 2016 quarter as a result of prepayment of discom loans under the UDAY scheme. The loan assets to discoms have more than halved to Rs 488 billion at the end 1HFY17.

    Credit growth remains muted
    (Rs m) 1HFY16 1HFY17 Change
    Sanctions 428,370 712,050 66.2%
    Disbursements 177,270 222,650 25.6%
    D / S 41% 31%  
    Advances 2,245,280 2,360,650 5.1%
     
    Sanctions Breakup
    Generation 81% 79%  
    Transmission 4% 3%  
    Distribution 4% 2%  
    Others 10% 17%  
  • Net interest income fell by 2.5% YoY in 2QFY16 on a marginal decline in interest income during the quarter. For 1HFY17, net interest income was slightly up by 1.2% YoY.
  • Net interest margins (NIMs) contracted by 0.4% YoY to 4.93% in 2QFY17 on a steeper fall in yield on assets. For 1HFY17, NIMs reduced by 0.3% YoY.
  • Other income surged five folds and seven folds in 2QFY17 and 1HFY17 respectively.
  • Backed by a steep rise in other income earned coupled with lower provisioning, profit before tax increased by 2.5% YoY and 6.3% YoY in 2QFY17 and 1HFY17, respectively.
  • At the net level, earnings recorded a jump of 10.4% in 2QFY17 aided by extraordinary income of Rs 650 m earned during the quarter. For 1HFY17, net profits were up by 9.6% YoY.
  • Net NPA to advances ratio increased to 2.4% in 2QFY17 as compared to 1.07% in 2QFY16.
  • Capital adequacy ratio (CAR) stands at a healthy 21.8% of which Tier I is 18.6% as at the end of 2QFY17.

    Standalone Financial Performance Snapshot
    Rs (m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Interest Income 69,320 69,190 -0.2% 136,790 140,220 2.5%
    Interest expended 39,910 40,520 1.5% 79,460 82,210 3.5%
    Net Interest Income 29,410 28,670 -2.5% 57,330 58,010 1.2%
    Net interest margin 5.26% 4.87% 5.19% 4.90%
    Other Income 140 750 435.7% 180 1,310 627.8%
    Operating expense 390 420 7.7% 2,200 2,440 10.9%
    Provisions and contingencies 3,810 3,010 -21.0% 6,290 4,750 -24.5%
    Profit before tax 25,350 25,990 2.5% 49,020 52,130 6.3%
    Extraordinary items -730 650 -1,470 -590 -59.9%
    Tax 7,670 7,920 3.3% 14,840 15,680 5.7%
    Effective tax rate 30.3% 30.5% 30.3% 30.1%
    Profit after tax/ (loss) 16,950 18,720 10.4% 32,710 35,860 9.6%
    Net profit margin (%) 24.5% 27.1% 23.9% 25.6%
    No. of shares (m) 2,640
    Book value per share (Rs)* 133.5
    P/BV (x) 1.0
    * (Book value as on 30th Sep, 2016)
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