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Published by: jass200910 on May 30, 2010
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 IFCI Limited 
 May 27, 2010
   C  o  m  p  a  n  y   U  p   d  a   t  e
For private circulation only. Please read the Important Disclosure at the end of the report.KSL Intelligent Research Reports can be accessed on: www.bloomberg.net (KHDS<GO>), www.thomsonreuters.com, www.capitaliq.com,www.themarkets.com, www.kslindia.com, www.moneycontrol.com, www.securities.com, www.valuenotes.comThis report is intellectual property of Khandwala Securities Ltd; queries on this report may be directed to Head of Research at research@kslindia.com
Bloomberg Consensus
(BUY/HOLD/SELL) 01 / 00 / 00
Sensex Nifty Bankex
16,388 4,917 10,250
CodesBSE NSE Bloomberg Reuters
Sensex IFCI
52 Wk: Hi/Lo 18,048/10,962 61.15/37.10Life High 21,207-Jan 08 121.20-Dec 07P/E 19.78 5.59P/BV 3.47 1.19Dividend Yield (%) 1.16 1.63Mkt Cap (INR Mn) 58,711,235 37,482Equity (INR Mn) - 7,378
* - TTM standalone basis Capitaline
Share Holding Pattern % Dec-09 Mar-10
Foreign 13.95 14.04Institutions 32.68 32.28Corporate 14.32 12.80Public & Others 39.05 40.88
Returns % Abs Relative to
Perf Sensex Bankex
1 Month 0.40 7.78 7.843 Months 6.83 6.01 0.201 Year 5.24 -12.54 -25.31
Relative Price Performance
Analyst: Hatim Broachwala
We have reviewed 4QFY10 results of IFCI. Acceleration inrecovery rate has brought the institution back on track. Freshsanctions and disbursement has started growing at a veryhigh pace. We retain ‘BUY’ on IFCI and upgrade our oneyear target price to Rs 76/- per share.
Results broadly in line with expectations; PAT up 2%YoY for FY10 driven by higher operating profits whichhave grown by 12%
NIMs flat at 1.8% for FY10 against similar margins lastyear, however it has significantly improved from 0.5% inFY08.
Retain ‘BUY’ with revised TP to Rs 76IFCI has since last three years turned into positive profits andnetworth. Fresh sanctions and disbursals are in full swing.Total approvals increased in FY10 to Rs 70bn as against Rs40bn previous year. Similarly, total disbursements improvedto Rs 60bn as against Rs 33bn last year. IFCI has a verycomfortable capital adequacy ratio of 17.9%. It can easilygrow at an accelerated rate without raising fresh capital. Itcontinues on plan to rope in a strategic partner which willnot only bring in capital to strengthen the balance sheet, butalso bring in the required expertise to expand its reach in thefinancial services gamut.
Descriptions INR Mn
Total Assets excluding deferred tax asset as on FY10 167,850Gain/(Loss) accrued on quoted Investments 5,564NSE profit accrued (5.44% stake) 5,770Recovery of NPA (assuming 40% recovery rate) 15,016
Total Liabilities as on FY10 135,620Preference Shares 2,640
Net Assets 55,940
P/BV Multiple 1.0Fair Value 55,940Number of Equity Shares (Mln) 738
Fair Value Per Share (INR) 76.0
Financial Summary (Standalone)
(INR Mn) FY2008 FY2009 FY2010
Total Income 21,114 14,845 16,793Operating Profit 11,310 5,959 6,675Profit After Tax 10,206 6,561 6,709EPS (INR) 15.2 8.6 9.1BV (INR) 38.0 44.5 58.9
Khandwala Securities Limited
 IFCI Limited  May 27, 2010 2
Sanctions/Disbursals Soaring 
 Fresh sanctions and disbursals are in full swing. Total approvalsincreased by 75% in FY10 to Rs 70bn as against Rs 40bn previous year.Similarly, total disbursements improved by 83% in FY10 to Rs 60bn asagainst Rs 33bn last year. Income from core business will have toaccelerate to support bottom-line, as proceeds from recovery of badloans will decrease along with decrease of Gross NPA base.
020406080FY07FY08FY09FY10(INR Bn)SanctionsDisbursals
Stable Margins
 NIMs are flat at 1.8% for FY10 against similar margins in FY09;however it has significantly improved from 0.5% in FY08.Management expects NIMs to improve to 2.6% in FY11 and 2.8% inFY12.
Recovery process to accelerate
 With a rebound in economic activity, we expect NPA recoveries toaccelerate. We have factored 40% recovery from NPA. Gross NPAshave scaled down 26% to Rs38bn in FY10, on the back of acceleratedrecovery of NPA. Net NPAs as of March 10 were Rs0.5bn. Provisioncoverage ratio of 98% exceeds the regulatory stipulation of 70% by ahealthy margin and eliminates future risk of provisioning and impacton profitability.
Khandwala Securities Limited
 IFCI Limited  May 27, 20103
0255075100FY06FY07FY08FY09FY10(INR Bn)859095100105(%)Gross NPANet NPAProvision Coverage Ratio (RHS)
 Well Capitalized
 IFCI has a very comfortable capital adequacy ratio of 17.9%. It caneasily grow at an accelerated rate without raising fresh capital. It alsocomplies the required capital adequacy of 15% by March 2011, asproposed by RBI. Judicious use of capital will provide adequatecushion for further leverage.
Banking license would providefurther upside
 In a bid to make our financial system more sound, regulator mightdecide to issue banking license to NBFC. Once it happens, IFCI wouldbe in all scenario most probable beneficiary. Once converted in to abank, cost of funds would significantly come down and would cater tocapital need to expand its loan book.
Other non-fund based activities
 In addition to normal lending activity, it has started focusing onprivate equity participation, project development and other advisoryservice. It plans to offer products, which banks are restricted likepromoter’s funding, take-out finance and debt swapping.
Investment in Subsidiaries
 It had invested Rs 382 cr in its various subsidiaries including IFCIFinancial services Ltd, IFCI Venture Capital Funds, IFCI Infrastructuredevelopment Ltd and IFCI Factors Ltd.

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