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IDBI's net profit dips 16 pc to Rs 12.59 billion; 45 pc pay-out to continue

Industrial Development Bank of India has posted a 16.12 per cent fall in its net profit to Rs 12.59 billion during the financial year 1998-99. Approvals, however, showed a modest rise of 6.6 per cent to Rs 255.55 billion, while disbursals declined by five per cent to Rs 144.03 billion.

Announcing the 1998-99 financial results, IDBI chairman and managing director G P Gupta attributed the fall in the financial institution's bottomline to the general slackness in the economy.

''The industrial production has fallen to 3.8 per cent in 1998-99 from 6.6 per cent in the previous year. Manufacturing sector growth has been 4.1 per cent, down from 6.5 per cent. The agricultural production during the year under review has been good'', said Gupta.

IDBI has declared a dividend of 45 per cent, maintaining it at the previous year's levels. The dividend pay-out amounts to Rs 3.03 billion.

''The special feature of this year's performance has been that more than a third of the approvals have gone to infrastructure,'' Gupta noted. Infrastructure approvals amounted to Rs 92.81 billion, accounting for 36.4 per cent of the aggregate sanctions during the year.

Gupta further said that project finance assistance rose by 15.8 per cent to Rs 126.54 billion from Rs 109.31 billion during the previous year. He added that IDBI will continue to maintain its focus on this line of lending. He said that the demand for rupee loans registered a good growth, but foreign currency funds showed a much lesser demand.

Forex loans declined by 39 per cent to Rs 33.63 billion from the previous year's Rs 54.84 billion. Gupta was optimistic that foreign currency lending by IDBI will rise during the current year.

The non performing assets level was 12 per cent (7.7 per cent sub-standard and 4.3 per cent doubtful assets). The NPA level during the last year was 10.1 per cent (seven per cent sub-standard and 3.1 per cent doubtful assets).

IDBI chief general manager K Kameshwara Rao said that the net NPAs during this year were Rs 65 billion (Rs 51 billion in 1997-98), while gross NPAs were Rs 83 billion in 1998-99 (Rs 64 billion the previous year).

Gupta informed that IDBI will work out its lending strategy at a meeting to be held after 15 days. ''We shall decide on how much to focus on short-term financing and cost of foreign funds'', he said adding that project lending is expected to rise by 10-15 per cent during 1999-2000.

He bemoaned that despite borrowing foreign currency funds at competitive rates from the international market, IDBI has not been able to push this capital to various sectors due to poor credit offtake for these funds.

''We will work out whether to utilise foreign currency funds for cross-border lending, or to invest in securities abroad and improve our return,'' he said.

He added that the FI would explore the possibility of using these funds to lend to projects receiving assistance from multilateral agencies like International Financial Corporation, Washington.

Total assets of IDBI rose by 15.3 per cent to Rs 691.43 billion. The net worth also recorded a 8.6 per cent rise to Rs 86.93 billion. The margin, measured by the difference between the average return on assets and financial cost of liabilities was 2.6 per cent as against 3.9 per cent in 1997-98. The return on average assets was two per cent as compared to 2.7 per cent.

Return on average net worth for the year declined to 15.1 per cent from 19.9 per cent in 1997-98. Earnings per share and book value per share at the year-end stood at Rs 18.70 and Rs 129.20 respectively.

The capital adequacy ratio was 12.6 per cent and debt-equity ratio was 6.53:1.

Sanctions under direct finance products increased by 9.2 per cent to Rs 247.18 billion and formed 97 per cent of total sanctions.

Disbursements under direct finance declined marginally to Rs 137.56 billion.

IDBI mobilised Rs 163.22 billion during 1998-99 from the previous year's Rs 151.67 billion, mostly through debt from domestic financial markets.

Gupta said that non-fund based income would go up by Rs 600 million during the current financial year. ''We will work towards improving margins and reducing the net cost of funds,'' he added.

The IDBI chief expects the interest rates to soften during the current fiscal. He said that IDBI will approach the debt market to mobilise resources only after the balance sheet is finalised.

UNI

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