Primary Dealers’ FY 12 profits down by 13 per cent

MUMBAI: Primary dealers (PDs), who underwrite government bond sales, saw their FY12 profits dip 13 per cent as expenses surged since the central bank held interest rates high to fight inflation.

"The last one year has been tough for primary dealers with spreads thinning and cost of funding on the rise," said Pradeep Madhav, Managing Director and Chief Executive Officer, STCI Primary Dealership.

"But this year, by and large the yields have moved in a narrow range and interest rates may come off in the last quarter of current fiscal," he said.

Expenses of all the primary dealers rose to 70 per cent to Rs 1,301 crore in FY12 from Rs 762 crore a year earlier, data from the Reserve Bank of India shows.
Though trading profit of primary dealers varied, profits for the industry as a whole rose 22 per cent to Rs 63 crore in FY12 from Rs 52 crore a year ago.

I-Sec Primary Dealership, a unit of ICICI Bank, topped the performance with a 278 per cent jump in trading profits to Rs 135 crore from Rs 35.6 crore, while most others like STCI, Morgan Stanley, Nomura FI Securities , PNB Gilts reported trading losses.

PNB Gilts, which is the only listed primary dealer, also showed a 32 per cent drop in net profit due to major trading losses. Its trading losses increased to Rs 14.3 crore in FY12 from Rs 11.2 crore in FY11.

Barring Deutsche Securities, I-Sec Primary Dealer and Goldman Sachs Securities, all other primary dealers reported a decline in net profit. Morgan Stanley and STCI were the worst performers with net losses at Rs 16.7 crore and Rs 9.3 crore, respectively.