BWI: Brickwork Ratings Assigns “BWR AA-” for Long Term Debt and BWR P1+ for Short Term Debt (with Maturity Beyond 12 Months and up to 18 Months) for IFCI Limited’s Existing and Proposed Debt Issues Aggregating INR 10,000 crores or INR 100 billion

Press release from Business Wire India
Source: Brickwork Ratings
Saturday, October 03, 2009 01:01 PM IST (07:31 AM GMT)
Editors: General: Consumer interest, Economy; Business: Advertising, PR & marketing, Banking & financial services, Business services, Financial Analyst, Stock exchanges
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Brickwork Ratings Assigns "BWR AA-" for Long Term Debt and BWR P1+ for Short Term Debt (with Maturity Beyond 12 Months and up to 18 Months) for IFCI Limited's Existing and Proposed Debt Issues Aggregating INR 10,000 crores or INR 100 billion
Long Term Debt: BWR AA-, Short Term Debt: BWR P1+ ; Outlook : Stable

Bangalore, Karnataka, India, Saturday, October 03, 2009 -- (Business Wire India) -- Brickwork Ratings assigns "BWR AA-" (Pronounced BWR Double A minus) for long term debt and BWR P1+ (pronounced BWR P1 plus) for Short Term debt (with maturity beyond 12 months and up to 18 months) for IFCI Limited's existing and proposed debt issues aggregating Rs.10000 Crores (Rupees Ten thousand Crores) or INR 100 billion. Brickwork Ratings' 'BWR AA-' stands for an instrument that is considered to offer HIGH credit worthiness in terms of timely servicing of principal and interest obligations and 'BWR P1+' stands for an instrument that is considered to offer EXCELLENT credit quality in terms of timely servicing of short term debt obligations.

The rating factored growth in sanctions and disbursement of loans, reduction in NPAs through effective recovery measures, comfortable capital adequacy, and initiatives being taken by the management to improve performance and leverage on its core competency.

Industrial Finance Corporation of India (IFCI) was established in 1948, by the Central Government as the first Development Financial Institution in the country to provide medium and long-term financial assistance to the industrial sector. IFCI was incorporated as a limited company in the year 1993 and was renamed as IFCI Limited through repeal of the Industrial Finance Corporation Act. The company is essentially involved in project financing but also provides other financial, leasing, and merchant banking services. IFCI provides medium term and long-term financial support to all segments of the Indian industry.

PERFORMANCE

IFCI earned a net profit in the year 2006-07 after a gap of about seven years. It has maintained the profitability trend since then. Total income in the year FY09 was Rs 1484 Crores. However, it has declined from Rs 2111 Crores in FY08. IFCI had registered net profit of Rs 898 Crores in the year 2006-07 as substantial income and consequent profits were generated through sale of shares and recoveries from NPAs. During the financial year 2007-08, IFCI had entered secondary equity market and generated large amounts of profits from short term transactions as well as by exiting from other stocks at appropriate times. Profit before tax for the year FY08 was Rs 1668 Crores while it stood at Rs 1010 Crores for the year FY09. Other income declined by Rs 66 Crores from Rs 148 Crores in FY 08 to Rs 82 Crores in FY 09.

Asset Quality: The gross NPAs are mainly on account of legacy accounts and have been on declining trend over past three years. IFCI has made full provisions for bad loans because of which its net NPAs were nil for FY07 and FY08. The net NPA however increased to 5.6% in FY09. IFCI's major exposure in FY08 was in Iron & Steel industry at 27.6% which has come down to 19.6% in FY09. IFCI continued to aggressively pursue recoveries from NPAs that resulted in recoveries of Rs 1200 Crores in FY08 and Rs 600 Crores during FY09.

IFCI had capital adequacy ratio of 19.7% as on 31st March 2009. During FY 09, IFCI's Net Worth had improved to reach Rs 3741 Crores over the previous year's Rs 3325 Crores. The Return on Assets stood at 4.87% during FY 09 while ROE was 17.57% in FY 09 as compared to 30.7% at end of FY 08.

IFCI has put in place Enterprise-wide risk management systems (ERMS) and controls to identify, measure, monitor and mitigate the overall level of risks undertaken.

OUTLOOK

IFCI is trying to reestablish itself as a major player in corporate finance by leveraging its knowledge pool, quality human capital, and institution building capabilities with focus on manufacturing, infrastructure, and service enterprises. It has targeted a growth of about 20% per annum. In addition to the core business of industrial and infrastructure project financing with an exit route within a definite timeframe, IFCI is looking to diversify to other areas such as short term loans with tenure of 1 to 3 years, structured financing while taking security coverage through pledge of shares, leveraging its expertise as the nodal agency for Sugar Development Fund to take up appraisal of sugar manufacturing units, expanding the advisory services business, and leveraging its unique capabilities in the asset resolution business. Risk management systems and practices are being strengthened and services of reputed consultants have been engaged for implementing enterprise-wide risk management system. IFCI's investment portfolio consists of some very attractive and valuable investments. While these are all positive features, IFCI's ability to source low cost long term funds, induct a suitable strategic investor and cautiously increase its lending activities is crucial to its future growth.

Copyright ©, 2009, Brickwork Ratings

Brickwork Ratings has assigned the rating based on the information obtained from issuer and other reliable sources, which are deemed to be accurate. Brickwork has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. Brickwork does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by Brickwork should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. Brickwork has the right to change, suspend or withdraw the ratings at any time for any reasons.


CONTACT DETAILS
A Suresh Kumar, Ph.D - Lead Analyst, Brickwork Ratings, 1-860-425-2742, suresh.kumar@brickworkratings.com
Milind Diwakar, MBA - Co-Analyst, Brickwork Ratings, 1-860-425-2742, milind.d@brickworkratings.com
Anitha G, Media Contact, Brickwork Ratings, 1-860-425-2742, media@brickworkratings.com
Rajender Walia, Director - Business Development, Brickwork Ratings, 1-860-425-2742, rajender.walia@brickworkratings

KEYWORDS
CONSUMER, ECONOMY, MARKETING, BANKING, BUSINESS SERVICES, Financial Analyst, STOCK EXCHANGES

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