IDFC Q1 net profit falls 13.55% to Rs482 crore

IDFC Ltd, which is gearing up to set up a bank after obtaining licence from the Reserve Bank of India, has reported a 13.55 per cent decline in its consolidated net profit at Rs482 crore for the April-June 2014-15 quarter, on the back of higher provisioning against bad loans.

Net profit for the year-ago quarter ended 30 June 2013 stood at Rs557 crore.

The infrastructure company said its loan book came under pressure while broking and asset management businesses performed well, necessitating a 246-per cent increase in loan provisioning, with 85 per cent of these in the energy sector.

IDFC's gross non-performing assets, or bad loans, surged more than 88 per cent to Rs342 crore from Rs182 crore a year ago.

The firm also made a one-time write-back on depreciation of Rs79.6 crore as it moves to the industry standard of the straight-line method of depreciation of its loan book, versus the more conservative written-down value method being used previously.

The gross NPA ratio doubled to 0.64 per cent of the total loans from 0.32 per cent a year earlier. Loans contracted by 7 per cent y-o-y to Rs53,848 crore.

The announcements during the last few weeks on long-term infrastructure bonds and introduction of REITs in India will benefit the sector and the company in the longer term, it said.

The company's assets under management grew by 19 per cent during past year and investment banking and broking fees were up 28 per cent as capital markets in India witnessed increased activity and buoyancy.

This quarter's results do not, however, represent long-term fundamentals at IDFC. While operational costs are likely to go up considerably as IDFC invests in a branch network and ramps up employee strength, the company's earnings and return on investments would bounce back in a few years.