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Our Banking Bureau
New Delhi/Mumbai, Oct 29: Two term-lending institutions -- Industrial Development Bank of India and Industrial Finance Corporation of India -- announced dismal first-half results on Thursday. IDBI's net inched up to Rs 705 crore in April-September 1998 from Rs 689 crore in the corresponding period of the previous fiscal registering a paltry 2.3 per cent rise while the Delhi-based IFCI's net slumped to Rs 68.34 crore from Rs 217.59 crore.
IFCI chief PV Narasimham singled out Rs 150 crore worth of provisioning for doubtful loans as the reason behind the dip in profit. IDBI also made an indentical provisioning on account of NPA against Rs 130 crore done in April-September 1997, chairman GP Gupta told The Financial Express. The real villain, analysts said, is higher interest expenses which jumped by Rs 397 crore in the first half (from Rs 2324 crore in April-September 1997 to April-September 1998) while income from operations grew by only Rs 322 crore (from Rs 2420 crore to Rs 2834 crore).
Narasimham refusedto identify the quantum of non-performing assets although analysts feel NPAs of the institutions have spiralled. The IDBI release was also silent about the NPAs. Gupta said in percentage term, the NPAs level has remained the same.
IDBI's total income during the first half aggregated Rs 3723 crore registering a growth of 10.8 per cent over the corresponding level in the previous year. The total expenditure has spurted from Rs 2420 crore to Rs 2834 crore during the first half.
Its gross profit (after interest but before depreciation and tax) and profit before tax amounted to Rs 889 crore and Rs 793 crore, respectively. It has made a provision for tax to the tune of Rs 88 crore.
IFCI's non-fund income saw a drop of 5 per cent as both the demand for foreign exchange loans and guarantees dropped drastically. Gross profit for the first half was Rs 119.92 crore as compared to Rs 297.63 crore for the same period in the previous year. Credit delivery in terms of disbursals was Rs 2,248 crore, a growth of 12 percent over Rs 2,014 crore over the corresponding period last year.
IDBI recorded a 23.7 per cent growth in overall sanctions under all schemes during April-September 1998 at Rs 13,290 crore. The disbursements during the same period at Rs 6603 crore were higher by 5.3 per cent over disbursements made during April-September 1997.
IFCI, on the other hand, sanctioned Rs 4,439 crore for 131 projects registering five per cent dip compared to Rs 4,680 crore to 160 projects in the corresponding period of the previous year. The lower level of sanctions is on account of the sluggish industrial climate in steel, cement, textiles and automobiles, which are the main sectors where IFCI has exposures, Narasimham said.
A major chunk of IDBI's assistance (36.7 per cent) continued to flow to infrastructure sectors. Industry wise, the share of electricity generation in overall assistance sanctioned (32.7 per cent) was the highest, followed by chemicals and chemical products (13.8 per cent), textiles (6.7 per cent), ironand steel (6.2 per cent). Together, these five industries accounted for 63.4 of total assistance approved to all industries during April-September 1998.
IDBI has raised Rs 9435 crore worth of rupee resources during April-September 1998. The borrowings primarily comprised Omni Bonds (Rs 6996 crore), certificate of deposits (Rs 805 crore) and term-money bonds (Rs 1619 crore). The capital gains bonds and fixed deposits were the other sources of domestic borrowings. The institution's recent Flexi Bonds IV had mobilised over Rs 1300 crore.
IFCI, on the other hand, mobilised rupee resources of the order of Rs 2,056 crore. The majority of these funds came from private placement of bonds, smaller amounts were garnered through inter-corporate deposits and certificates of deposits. The average maturity being four years. IFCI also raised preference share capital to the extent of Rs 214 crore at a coupon rate of 10.75 per cent.
INSIGHT
A dismal show
It has been a dismal performance from bothIFCI as well as IDBI. Both on a year-on-year basis as well as on a quarter to quarter basis there has been a fall in net profit of IDBI. On a Y-o-Y basis the fall is 6.7 per cent for the second quarter. There is a similar fall in profit earned in the second quarter as compared to the first quarter in the current year. In the first quarter there was a growth in net profit by 11 per cent. Expenditure on interest has increased by 22 per cent even though revenues are up by less than 5 per cent.
As on March 31, 1998 the cumulative of substandard, doubtful and loss assets of IDBI worked out to Rs 6,461 crore which is equal to 77 per cent of its total networth. The DFI has chosen to provide for barely 2.6 per cent of its gross NPAs as against 62 per cent of gross NPAs being written off by banks such as Corporation Bank. IFCI's NPA position is even worse than that of IDBI.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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