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UBS Investment Research
Infrastructure Development Finance
Operationally a good quarter
Headline numbers lighter than estimate but quality of numbers is good
IDFC reported PAT (consolidated) of Rs 3.4 bn (UBSe of Rs 3.5 bn) up 16% YoY.
Standalone numbers came below estimate at Rs 3.06 bn (UBSe of Rs 3.4 bn) on
account of low capital gains booked during the quarter. Income came in line with
estimates, though the mix of revenues was different than expected with low NIItreasury
offset by strong fee based income. Loan growth was stronger than
expected at 19% QoQ while spreads came down to 2.4% as expected. IB and AMC
revenues were strong in line with capital market trends.
Lumpy loan growth as project finance gains prominence
Loan growth at 37% YTD growth has been much stronger than expected; primarily
driven by power and roads segment. Part of growth could temper down in H2FY11
as company resorts to sell down of deal-related project finance. Spreads at 2.4%
has further down bias due to large project involvement and more revenue from fee
based activities; though new funding options like infra bonds and ECBs will help.
Non fund based income see strong progress QoQ
Fee income grew 77% QoQ to Rs 2.6 bn on back of robust loan and IB related
fees. Capital gains to PBT were at its lowest at 3% while cost to income came
down to 18% due to strong revenues. RoA (rolling 12 month) came at 3.3% while
RoE came in at 14.9% for the quarter.
Valuation: PT 230, Maintain Neutral
We revise our earnings estimate by 4-5% for FY11/12 factoring in higher loan
growth. We marginally raised our PT to Rs 230 and maintain Neutral. We derive
our PT based on a STOP-based methodology.
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