Wednesday, January 13, 2010

Stock Idea: IFCI

Third quarter performance from this oldest financial institution of India was disappointing but yet the share price did not exactly crash. This is because investors, despite the results, know that IFCI is looking for a suitable groom and that anticipation of a ’very happy married’ has kept the buoyancy in the share price intact.
For Q3FY10, sequentially revenue was down 6.32% at Rs.385.07 crore though YoY was up 9%. Net profit was down by 28.42% on QoQ at Rs.136.35 crore and yet, YoY, it managed to show a jump of 30%. So clearly, call it the base effect or anything, the improvement YoY seems assuring. Its not like a total downhill performance.
The Govt is now considering two options – either merge IFCI with another institution or sell the Govt stake to the perfect suitor. What makes IFCI extremely attractive for stake sale and not merger is that it has a substantial realty hold. It has about 4.66 lakhs sq. ft. of commercial area, of which, prominent ones are IFCI Tower of about 3 lakh sq. ft. in New Delhi and about 30,000 sq. ft. in Nariman Point in Mumbai. In addition to this, it has 7.54 lakh sq. ft. of owned residential premises, of which major ones are in Mumbai and Delhi. That apart, IFCI is holding 5.44% stake of NSE, 29% stake of Tourism Finance Corporation, 17% stake of Stockholding and 8% of GIC Housing Finance. In addition, IFCI has investments in various quoted and unquoted investments, of close to Rs.2,000 crore.
Currently, the Govt has no direct stake in IFCI. It is through State-owned institutions like LIC (8.4%), Punjab National Bank (1.75%), GIC (2.26%), Central Bank of India (1.51%), Canara Bank (1.40%), Oriental Insurance (1.39%), UCO Bank (1.16%) and New India Assurance (1.16%), totaling 19.03%.
The capital adequacy of IFCI is in excess of 20% against the regulatory requirement of 10%. This means that IFCI is no longer looking for a stake sale for capital induction. A 20% CAR means IFCI can itself double its balance sheet size.
We have been consistently asking our users to stay invested or even buy into IFCI. At every dip, right since the levels of Rs.20, we urged out users to buy and most have done so and today they would surely be a happier lot. Stay invested.
Source: Internet ( by S P Tulsian)

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