finance shares information IFCI India

IFCI Ltd (updated - 05 July 2010)
ICICI Securities, a leading brokerage house has recommended to `IFCI` as `pick of the week` with a three-month target price of Rs 63.6 (potential upside 10%) as against current market price of (CMP) of Rs 57.8.

The recommendation rationale is as under:
``IFCI is currently trading at 1x its FY11E BV at the CMP of Rs 57.8. Going forward, healthy growth prospects in project finance would boost profitability. Its NIM has improved consistently from -1.8% in FY07 to 1.8% in FY10 and it expects NIM to improve to 2.8% by FY12E. This coupled with strong asset quality and capital adequacy (CAR @ 17.9%) would provide the necessary impetus for the growth phase. Hence, we value the bank at 1.1x its FY11E book value at Rs 63.6.``

``IFCI is the first development finance institution (DFI), established in 1948, to fuel industrial development through medium and long-term finance. The company has fought a long battle against unviable business and low profitability due to asset liability mismatch, mounting NPA and high cost of borrowings, which led to its restructuring in FY03. The bank continued to suffer despite the financial assistance offered as losses soared to Rs 50 billion and capital adequacy crashed to -300% by FY07.

The company needed a strategic investor as a white knight. However, all contenders backed out due to ambiguity on the government held optionally convertible bonds worth Rs 5.23 billion. IFCI managed a turnaround without strategic help and has come out with a good set of numbers after struggling for two years in FY10. Its balance sheet size grew by 32% to Rs 195.89 billion in FY10 with a healthy 13% YoY growth in total income to Rs 16.79 billion.``

Technical outlook: ``The stock has been in a long consolidation phase since hitting a high of Rs 61.80 in mid September 2009. The share price movement has been largely between the levels of Rs 57 and Rs 60 on the higher side and Rs 47 and Rs 44 on the lower side for almost nine months. During the whole consolidation, the share price had encountered stiff resistance at the downward sloping resistance trend line, which was formed by joining the significant highs since September 2009. The smart gains in the current week have seen the share price recording a strong break-out above the resistance trend line on the weekly chart. The break-out has been accompanied by a sharp increase in trading as well as delivery volumes. Rising short-term moving averages are also acting as a cushion on every correction indicating strength in the current up move. Among momentum oscillators, the weekly RSI remains in a rising trajectory whereas the weekly MACD has given a positive crossover above the trigger line suggesting build-up of momentum on the upside.``

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