Idbi Net Rises 31.2% To Rs 1,501 Crore

Industrial Development Bank of Indias net profit jumped 31.2 per cent to Rs 1,501 crore in 1997-98 from Rs 1,144 crore in the previous year, powered by a 300 basis points fall in marginal cost of liabilities, strong asset growth and a widening of spreads to 3.9 per cent from 3.7 per cent.

IDBIs net profit rose despite the industrial slowdown and a rise in its actual non-performing assets. The IDBI board has recommended a 45 per cent dividend, against 35 per cent in 1996-97.

Announcing his last financial results, IDBI chairman and managing director S H Khan said, It was a difficult year. The capital market was in doldrums, coupled with a slowdown in industrial growth. Despite this, IDBIs performance has been good.

Due to the easy liquidity conditions, the institution managed to bring down its marginal cost of borrowing by 300 basis points, said Khan. The margins improved to 3.9 per cent from 3.7 per cent, which had a positive impact on the results. Besides, assets grew over 19 per cent, adding volumes. However the rise in assets without commensurate accretion to reserves saw the capital adequacy fall to 13.7 per cent from 14.7 per cent.

Khan said the FI had not yet taken a view on whether or not to cut its prime rates.

During the period under review, IDBIs gross profit grew 20.75 per cent to Rs 1,972 crore. The net worth increased 12.14 per cent to Rs 8,003 crore while total assets increased 19.13 per cent to Rs 59,957 crore. In a clear reference to competitor Industrial Credit and Investment Corporation of India, Khan said that at the end of the year, We are still number one in terms of growth in total assets and rise in profits.

Khan said the institution would continue to focus on funding infrastructure projects. He felt that demand for assistance from grassroots projects in major sub-sets of the manufacturing sector, which remained moderate in 1997-98, would pick up during the current fiscal. Demand for funds for modernisation, technology upgradation and expansion of operational scale in these industries is also expected to be strong this year. The return on average assets improved from 2.4 per cent to 2.7 per cent. Similarly, the return on average networth rose to 19.9 per cent from 17 per cent. The provision for tax dipped because of the low tax rate. Further, the tax-deductible provisions and write-off were higher than in the previous year.

IDBIs sanctions grew 41 per cent and disbursals 31 per cent to Rs 24,198 crore and Rs 15,165 crore, respectively. It raised Rs 15,167 crore Rs 13,287 from the domestic market and the rest from the foreign currency market. In the current fiscal, IDBI plans to raise Rs 18,000 crore, of which Rs 15,000 crore will come from the domestic market. The institution aims to hike sanctions and disbursals 20 and 25 per cent, respectively.