SBI Caps puts 'Buy' on IDFC despite slower growth in Q2
SBI Cap Securities recommends 'buy' on IDFC for target price of Rs 91. Today, IDFC stock was at Rs.67.10, up 3.07 per cent on BSE.
By ET Online |
MUMBAI ��� SBI Cap Securities recommends 'buy' on IDFC for target price of Rs 91. Today, IDFC stock was at Rs.67.10, up 3.07 per cent on BSE.
While in its second quarter result IDFC has seen a slowing down in growth, its AUM of project equity business kept growing. Gross approvals and disbursements slowed down by 12% and 7% YoY, respectively but advances grew by 24% YoY.
However, IDFC has raised $700 mn in its private equity fund III and $870 mn in its project equity fund. With this, AUM of the private equity fund has more than doubled over the last quarter.
While the worsening macro environment is one reason for the slowdown, SBI Cap points out that limits on leveraging is another reason for the cautious approach on loan growth.
IDFC has shelved plans of capital raising in the near future. Accordingly, SBI Cap does not see any equity infusion till the end of FY10. With slower loan growth, IDFC would be able to maintain a Tier I capital adequacy at 20%. Loan growth continued to slow down and the same trend is likely to continue.
Interestingly, there is a surprise element in other income component in the September quarter. Non-interest income grew by 71% YoY primarily led by growth in profit on sale of principal investments. Profit on sale of principal investments was at Rs.890 mn for the quarter as against Rs.460 mn in Sep 2007.
Maintaining 'buy', SBI Cap only revises its earnings estimate downwards to account for lower loan growth and have not considered any equity dilution in its estimates.
While in its second quarter result IDFC has seen a slowing down in growth, its AUM of project equity business kept growing. Gross approvals and disbursements slowed down by 12% and 7% YoY, respectively but advances grew by 24% YoY.
However, IDFC has raised $700 mn in its private equity fund III and $870 mn in its project equity fund. With this, AUM of the private equity fund has more than doubled over the last quarter.
While the worsening macro environment is one reason for the slowdown, SBI Cap points out that limits on leveraging is another reason for the cautious approach on loan growth.
IDFC has shelved plans of capital raising in the near future. Accordingly, SBI Cap does not see any equity infusion till the end of FY10. With slower loan growth, IDFC would be able to maintain a Tier I capital adequacy at 20%. Loan growth continued to slow down and the same trend is likely to continue.
Interestingly, there is a surprise element in other income component in the September quarter. Non-interest income grew by 71% YoY primarily led by growth in profit on sale of principal investments. Profit on sale of principal investments was at Rs.890 mn for the quarter as against Rs.460 mn in Sep 2007.
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Maintaining 'buy', SBI Cap only revises its earnings estimate downwards to account for lower loan growth and have not considered any equity dilution in its estimates.
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