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IFCI Rs 47
A Turnaround Story!
We recently met the management of IFCI and the key highlights of our interaction are as
follows:
• Management expects ~ 25%-30% growth in loan book in FY12 against 41.6% growth
recorded in FY11. Asset growth is largely funded through market borrowings. Power,
roads, steel, real estate and banking, financial services & insurance contribute
significantly to outstanding loan book. 40% of the loan book has legacy problems.
Loan book’s duration is at 5+ years.
• The company is also raising funds through tax free infrastructure bonds.
• NIM is likely to be maintained at ~ 2.8% to 3.0% range in FY12. IFCI has shown sharp
improvement in NIMs in last two years. The management is confident to maintain
healthy NIMs going forward.
• As a part of business restructuring, the management has laid sharper focus on
improving profitability of subsidiaries companies such as IFIN – a retail and
institutional broking arm, leveraging corporate relationship for institutional,
syndication and advisory businesses. The management also expects good traction in
advisory fee income going forward.
• IFCI has sizeable real estate properties in various pockets of the country. They have
set up a separate company to develop these and realize their value from the market.
• IFCI has appointed consultant to advice for foray into banking business. Market is
expecting release of RBI guidelines on new banking license in the current fiscal. So
we believe clarity on new banking license will help IFCI to form better business
strategy for foray into banking business. Modalities of banking business are yet to be
decided.
• IFCI has large investment book (~ Rs8,006 crore) which may be sold based on market
opportunities. This book has huge hidden value as most of the investments have been
made at par values.
• The company saw up gradation in their credit rating. We believe up gradation of
credit rating of the company is reflecting sustainable improvement in core
operations.
• No equity raising plan in near future.
Risk: Lack of clarity about conversion price of convertible debenture and resultant implication
equity dilution front are the key risks in the stock.
Outlook & Valuation: At Rs 47.8, the stock is quoting at 1x FY11 book value. Steady loan
growth outlook, stable margins, development of real estates, and hidden value of investment
are key medium term positives for the bank.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IFCI Rs 47
A Turnaround Story!
We recently met the management of IFCI and the key highlights of our interaction are as
follows:
• Management expects ~ 25%-30% growth in loan book in FY12 against 41.6% growth
recorded in FY11. Asset growth is largely funded through market borrowings. Power,
roads, steel, real estate and banking, financial services & insurance contribute
significantly to outstanding loan book. 40% of the loan book has legacy problems.
Loan book’s duration is at 5+ years.
• The company is also raising funds through tax free infrastructure bonds.
• NIM is likely to be maintained at ~ 2.8% to 3.0% range in FY12. IFCI has shown sharp
improvement in NIMs in last two years. The management is confident to maintain
healthy NIMs going forward.
• As a part of business restructuring, the management has laid sharper focus on
improving profitability of subsidiaries companies such as IFIN – a retail and
institutional broking arm, leveraging corporate relationship for institutional,
syndication and advisory businesses. The management also expects good traction in
advisory fee income going forward.
• IFCI has sizeable real estate properties in various pockets of the country. They have
set up a separate company to develop these and realize their value from the market.
• IFCI has appointed consultant to advice for foray into banking business. Market is
expecting release of RBI guidelines on new banking license in the current fiscal. So
we believe clarity on new banking license will help IFCI to form better business
strategy for foray into banking business. Modalities of banking business are yet to be
decided.
• IFCI has large investment book (~ Rs8,006 crore) which may be sold based on market
opportunities. This book has huge hidden value as most of the investments have been
made at par values.
• The company saw up gradation in their credit rating. We believe up gradation of
credit rating of the company is reflecting sustainable improvement in core
operations.
• No equity raising plan in near future.
Risk: Lack of clarity about conversion price of convertible debenture and resultant implication
equity dilution front are the key risks in the stock.
Outlook & Valuation: At Rs 47.8, the stock is quoting at 1x FY11 book value. Steady loan
growth outlook, stable margins, development of real estates, and hidden value of investment
are key medium term positives for the bank.
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