finance term lending institution shares idfc

Infrastructure Development Finance Co. (IDFC) (updated - 30 April 2010)
IDFC is back on track in 2009-10, largely led by traction in fee-based income, though core business also showed improved performance. Net interest income from infrastructure lending maintained last year’s growth rate of 34 per cent year-on-year (yo-y), aided by improved net interest margins of 2.8 per cent. Non-interest income rose 55 per cent to Rs 950 crore after falling marginally in 2008-09 due to increase in the equity book, jump in assets under management (led by mutual funds) and strong momentum in capital markets. Net profit rose 42 per cent to Rs 1,062 crore, as provision for loans declined 15 per cent due to near-zero non-performing assets.

IDFC’s balance sheet size grew 13 per cent to Rs 33,562 crore — almost double the growth rate of 7 per cent clocked in 2008-09 — as loan book expanded 21.5 per cent to Rs 25,000 crore. Gross approvals tripled, while gross disbursements jumped 60 per cent, mainly on account of alower base of last year.

The widening gap between disbursements and approvals —Rs 17,480 crore in 2009-10 from Rs 2,232 crore in 200809 — means higher loan book growth in future, boosting chances of net interest income from the core business. However, it is worth looking at whether the company can sustain 2.8 per cent net interest margins in a rising interest rate scenario. IIFL’s analysts note, “With the anticipated rise in interest rates, we expect spreads to come under pressure, as IDFC remains 100 per cent wholesale funded.” Introduction of a new category of infrastructure finance companies (IFCs) by the Reserve Bank of India and relaxation of exposure limits for bank lending to IFCs (up to 20 per cent of its capital funds) will lead to better funding costs and improved net margins and return on equity.

After outperforming the Sensex significantly in the past one year, analysts are advising investors to either hold or accumulate the stock, given high valuations of 2.6 and 2.3 times estimated price to book value for 2010-11 and 2011-12, respectively.
source - business standard

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Infrastructure Development Finance Co. (IDFC) (updated - 23 Dec 2010)
IDFC’s 25 per cent stake sale in IDFC Asset Management to Natixis for `300 crore values the asset management company (AMC) at `1,200 crore, or six per cent of the assets under management (AUM). In March 2008, IDFC bought the AMC for `820 crore (5.8 per cent of AUM) from Standard Chartered. For IDFC, the pre-tax profit works out to `95 crore. Analysts have welcomed the deal, especially the valuation, which is higher than in the recent deals (threefour per cent of AUM). IDFC may have been able to command the premium valuation because it managed to increase assets by 43 per cent between March 2008 and September 2010.

Besides the immediate profit, Natixis will open access to global investors for IDFC. Natixis is one of the 15 largest asset managers in the world in terms of assets and managed about $719 billion as of September. IDFC AMC will be able to use Natixis’s distribution network to raise funds abroad for investing in India.

In the core business, while liquidity crunch poses a potential threat to margins of the entire financial sector, IDFC is relatively better positioned than banks, given the comfort on the asset-liability profile and its ‘infrastructure finance company’ status that gives it the benefit of cheaper funds and the identity of being a specialised player in the robustly growing infrastructure finance space. Analysts have upgraded the stock and expect a 22 per cent return over a year.
source - business standard