Capitaline

Analyst Meet / AGM 03-Aug-15

Conference Call

IDFC

To make additional provisioning of Rs 2500 crore in Q2FY2016

IDFC conducted concall on 31 July 2015 to discuss financial results for the quarter ended June 2015. Rajiv Lall, MD & Vice Chairman, Vikram Limaye, MD & CEO, Sunil Kakar, Group Chief Financial Officer addressed the call:
Highlights:

As per the company, the Q1FY2016 financial results are not comparable with FY2015 and Q1FY2015 did not have any bank venture related activity. The financial results for Q1FY2015 were inflated with one- off gains from income tax refunds and from change in depreciation policy. Also, the bank related expenses were only Rs 5 crore in Q1FY2015 picking up to Rs 85 crore in Q1FY2016.
The key asset segment, infrastructure continues to languish. The company has identified about Rs 8500-8800 crore of assets mainly in the restructured advance book as stressed assets.
About 40% of the advances book of the company relates to power sector, where various issues are unresolved.
The restructured advances of the company stands at 7% of total advance, of which about 90% relates to the energy sector.
Securities receipts stood at 0.3% of the advances.
As per the company, the GNPA+Resetructured Advances+Securities Receipts stands at around 8.4% of advances.
The company proposes to protect Proposed banking ventures balance sheet against known risk, and so the company proposes to make incremental Rs 2500 crore of provisions in Q2FY2016 utilizing non-distributable surplus reserves against these stressed assets. Thus, the net worth of the company is expected to decline by Rs 1600 crore. However, any write back of these provisions will be reversed back to the reserves.
The company proposes to have 50-60% provisions against aggregate stressed assets.
The company will have enough provisions take care of required regulatory provisions in case of slippages of theses stressed assets ahead.
The company did not utilized this option to step up provisions, as the company did not felt that stress in theses power sector assets would rise.

Banking venture update

The demerger will be effective from 01 October 2015, which is the date of the launch of banking operations.
Banking venture will be well capitalized with the capital base of Rs 13,000-13,500 crore and its tier-I capital ratio would be above 15%.
Bank will be listed and available for trading in the first week of November 2015.
Bank operations will started with 20-25 branches, of which about 15 will be in the rural area. Branch network will be stepped up to 60 branches by end March 2016 with 45 branches in the rural area.
Bank would exploit technology to serve the customers and keep costs in check.
Bank customers will experience lower branch dependence than other banks customers.
The revenue diversification will be the major focus area of the bank.
The RoA of the bank will be around 1%, this is factoring in the margins pressure. Margins will be witnessing pressure, till the CASA ratio picks up.

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