Infra finance companies bear brunt of slowdown

A weak credit market and a slowdown in the country’s project financing activities have taken a toll on the infrastructure finance companies during the third quarter of the financial year.

Infrastructure Development Finance Company (IDFC) on Thursday reported a 15 per cent dip in its third quarter net profit to Rs 184.61 crore compared with Rs 217.29 crore in the year-ago period, while the Kolkata-based Srei Infrastructure Finance recorded a 68.57 per cent decline in its bottom line for the quarter ended December 2008.

During the December quarter, the total consolidated income of IDFC rose 13 per cent to Rs 865.26 crore as against Rs 766.69 crore for the same period a year ago.

Amid a tight liquidity condition, the credit market shrunk during the period and the non-banking financing companies (NBFCs) found it hard to borrow funds from banks at affordable rates. Also, the companies have been delaying their projects due to the absence of feasible funding sources.

IDFC, which mainly engages itself in financing infrastructure projects, recorded a 6 per cent drop in its interest earnings to Rs 791.31 crore in Q3 as against Rs 842 crore recorded in the second quarter of FY09 on a standalone basis.

Similarly, Srei Infrastructure Finance has reported a 68.57 per cent decline in net profit at Rs 8.77 crore for the third quarter as against Rs 27.91 crore for the same period last year. The company said, “The fall in profit was on account of a conscious decision in October to go slow on disbursements, concentrate on improving cost effectiveness and intensify customer relationship till the time a clearer picture on the economy emerged.”

The company’s total consolidated income dipped 9.72 per cent to Rs 176.94 crore as against Rs 196.01 crore in the year-ago period. Srei’s consolidated operating profit stood at Rs 29.84 crore for the three-month period as against Rs 52.96 crore in the corresponding period of the previous year.

“The government and RBI are taking proactive steps to alleviate the problems of the financial sector. The stimulus being provided to the infrastructure sector will definitely help infrastructure financing institutions to improve business volumes in the immediate future,” said Srei Chairman and Managing Director Hemant Kanoria.