The June quarter results of Infrastructure Development Finance Co. can be summed up thus: net interest income increased by Rs27 crore, or 12%, compared with a year ago, with lower net interest income from treasury operations dragging it down.
At the same time, non-interest income increased by Rs52 crore, or 32%. That accounts for an increase of Rs79 crore, while total profit before tax went up by Rs85 crore.
Profits were also boosted during the quarter by a reversal of investment provisions of Rs23.89 crore. As a result, the quarter saw a write-back of provisions and contingencies of Rs6.6 crore, compared with provisions of Rs19.88 crore a year ago.
Even so, profit growth has been high, particularly when seen against the fact that in the March quarter, profits after tax amounted to just Rs116 crore. Diluted earnings per share, which were Rs0.90 for the March quarter, rose to Rs2.09 in the three months to June.
The main reason for the spurt in growth was a big increase in both revenues and profits from the investment and asset management businesses. The increased revenues and profitability of the non-infrastructure business was widely expected, given the improvement in the capital markets during the June quarter. Profits before tax for the segment rose by 131% to Rs48 crore. Assets under management have increased substantially, leading to a fourfold increase in fees from Rs18 crore to Rs72 crore.
But the surprise has been in the infrastructure segment, with profits before tax from infrastructure operations going up to 36.6% of revenues from the business, compared with 32.7% in the year-ago period. In the March quarter, profit before tax from infrastructure operations was a low 16% of revenues from the segment. The increase in profit before tax from this segment has been Rs57 crore, a rise of 21% year-on-year.
The loan book contracted a bit from end-March. But total exposure, which includes equity stakes in projects and non-fund based exposure, increased by 6.6% compared with the March quarter. The management has said that they would be cautious about growth in the current environment, but with the economy looking up, that should now change.
As a lender to infrastructure, the stock has been an obvious play on the infrastructure story on which great hopes are being placed. The company also benefits from the abundant liquidity available in the debt markets at the moment. For these reasons, the company has beaten the BSE Bankex, the banking sector index on the Bombay Stock Exchange.
The stock is likely to continue to do well, as credit to infrastructure picks up and capital market conditions improve. But the stock has run up 20% in the past one week, which would account for its less-than-enthusiastic reaction to the results.
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