Excluding provisions in Q2, we could have made profit: IDFC

On Saturday, IDFC posted a net loss of Rs 1,468 cr on the back of increased provisioning

Infrastructure financing company IDFC has said if the company wouldn’t have had made provisions to the tune of Rs 2,639 crore, the lender would have managed to post profit.

“The results would have been flat if we exclude the provisions. But we have made more provisions than necessary to ensure that there is no overhang with respect to asset quality later,” said Vikram Limaye, managing director and chief executive officer.

He added that provisions announced in the April-June quarter were actually made in the July-September quarter. So in the second quarter, IDFC set Rs 2,500 crore of provisions aside from its non-distributable reserves for provisions against bad loans. This is seen as a part of an exercise by the lender to clean its book before venturing into universal banking.

On Saturday, IDFC posted a net loss of Rs 1,468.83 crore on the back of increased provisioning. Of the provisions of Rs 2,639 crore during the quarter, Rs 2,500 crore were loan loss provisions and the remaining were on the back of interest income reversals.

IDFC also saw further pressure on its asset quality. As a percentage of gross advances, gross non-performing assets (NPAs) were at 3.17 per cent compared with 0.62 per cent, a year ago. Net NPA, as a percentage of net advances, were at one per cent as on September 30, compared with 0.42 per cent during the same period last year. The management said the new slippages were from the power sector. At present, about 40-41 per cent of IDFC’s loan book is skewed towards the power sector.

Limaye said in the asset book that has been transferred from IDFC to IDFC Bank, there won’t be any need for incremental provisioning. The new bank that was launched on October 1 had a starting balance sheet size of Rs 73,447 crore and net worth of Rs 13,322 crore. The shares of the bank are expected to list and trade on Friday.

IDFC had received the Reserve Bank of India’s approval to start banking operations last year. IDFC is now the holding company of the bank, which is called IDFC Bank.