IFCI net up but skips dividend

NEW DELHI, JUNE 3: Term-lending institution, IFCI Ltd has reported a net profit of Rs 59.37 crore in 1999-2000 as against last year's Rs 2...

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NEW DELHI, JUNE 3: Term-lending institution, IFCI Ltd has reported a net profit of Rs 59.37 crore in 1999-2000 as against last year’s Rs 23 crore on a total operating income Rs 2898.18 crore. But IFCI skipped dividend for the first time in its over 50 years of existence.

The profits, higher by more than 100 per cent from previous year’s Rs 23.5 crore, are much below the 1997-98 level of Rs 370.50 crore. IFCI had paid a 10 per cent dividend last year. IFCI’s performance continued to be affected by its high level of non-performing assets (NPAs) at 20.78 per cent of its asset base, the company said in a statement.

"NPAs have been arrested marginally by settling of 160 cases involving a principal amount of Rs 432 crore. Another Rs 1,300 crore worth of assets are expected to be upgraded in the current year," P V Narasimhan, IFCI chairman said here.

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He said the performance during 1999-2000 was not comparable with the previous year’s since IFCI had changed its accounting policy to recognition of income on a cash basis, resulting in an additional provision of Rs 144.85 crore.

As a result IFCI’s reserves have fallen to Rs 648.21 crore from Rs 936.14 crore in 1998-99.

Till last year, IFCI was recognising income on an accrual basis on NPA till the date of their becoming non-performing and reversal of unrealised income in the immediate following year.

During the period, IFCI’s sanctions were Rs 2,376 crore as against the disbursements of Rs 3,262 crore, which included guarantees of Rs 525 crore.

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In the last quarter of 1999-2000, IFCI’s operating incomestood at Rs 718.69 crore and it registered a loss of Rs 7.12 crore. The loss was on account of provisioning for bad and doubtful debts, Narasimhan said.

The Corporation’s equity rose to Rs 639.52 crore at theend of March 2000 from Rs 353.56 crore, due its 1:1 rights issue, which closed in February.

IFCI was able to raise Rs 286 crore against the offer for Rs 353 crore. He said while most of the shareholders subscribed to the issue, some co-operative banks, mutual funds and private banks did not subscribe to the issue.

IFCI’s robust performance has surprised analysts as despite having a robust business performance, IFCI’s 30 per cent stake owner, Industrial Development Bank of India’s (IDBI) net profit has plummeted by 24.78 per cent to Rs 947 crore from Rs 1259 crore due to a higher provisioning for the bloated non performing assets during 1999-2000.

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In fact, IDBI has to made a provision of Rs 774 crore for its bad debt during the year, up from Rs 311 crore recorded during last year.

The institution had blamed depressing non-performing scenario for the huge losses. Chairman IDBI G P Gupta had said over Rs 2,200 crore of fresh npa was added to the already Rs 7000 crore during 1999-2000 itself.

Less to speak about the big corporates, even the small companies’s assets with a capital of Rs 10 core have turned bad and Rs 900 crore of fresh NPA is due to them.

Though recovery has started quite some time it has not get reflected in the institutions’ balance sheet, he said. Mapping out the institution’s recovery strategy Gupta said that the priorities are improving the operaing margins, reduce cost of borrowing, containing the growth of npas, eraning more as fee based income and fundig overseas projects.