The financial year was a difficult and a challenging one for all of us.Covid-19 impacted all sectors of the economy. Banks and financial services companies asproxies for the economy were impacted significantly. The severity of the second wave ofCovid-19 belied hopes of an early economic recovery but with vaccination efforts gainingmomentum there is hope that normalcy in economic activity would be restored in the laterpart of the coming financial year.
The Reserve Bank of India vide their letter dated July 20 2021 hasclarified that after expiry of the lock in' period of 5 years IDFC Limited canexit as promoter of IDFC FIRST Bank Limited.
In pursuit of creating maximum value for shareholders over the lastfew years the Board has been focused on cleaning up the corporate structure of the IDFCGroup while awaiting the expiry of the 5-year lock in period. Most of the non-coreentities/investments of the IDFC Group have been disinvested as per the details below:
|1 Private Equity business carried on through IDFC Alternatives ||June 30 2018 and January 31 2019 |
|2 IDFC Infrastructure Finance Limited ||Tranche 1 on March 12 2019 and Tranche 2 on March 30 2020 |
|3 IDFC Securities Limited and IDFC Capital USA Inc ||June 10 2020 |
|4 Liquidation of IDFC Capital Singapore Pte Ltd ||February 24 2021 |
|5 Windmills ||August 14 2020 |
|6 Office Premises at Naman chambers Merger of IDFC Alternatives IDFC ||November 26 2020 |
|7 Trustee and IDFC Projects with IDFC Limited ||Expected by March 31 2022 |
|8 Detachment of IDFC Foundation ||Expected by June 30 2022 |
The remaining entities in the IDFC Group corporate structure are IDFCFIRST Bank IDFC AMC and IDFC Foundation. In addition there are two joint venturecompanies held under IDFC Foundation Delhi Integrated Multi-Modal Transit Systems Limitedand Infrastructure Development Corporation (Karnataka) Limited. IDFC Foundation owns 50%and 49.5% equity in these entities with the State Government of NCT Delhi and the StateGovernment of Karnataka as joint venture partners respectively. As part of its charter ithas invested in these two joint venture entities which are highly regarded. IDFCFoundation is a Not For Profit-Section 8 company which restricts the payment of dividendand repatriation of capital on winding up/ liquidation to its parent. However alienationof the investments by Foundation and detachment of Foundation are a prerequisite for theoptimum restructuring of IDFC for creating maximum value for shareholders. IDFC managementhas been making full efforts in this direction but progress on this front has been slow inview of challenging nature of specific conditions that exist in the joint ventureagreements.
The Board is strongly committed and very focused on creating maximumvalue for shareholders in a reasonable period of time. Towards this goal earlier thisyear the Board has proactively appointed a Strategic Advisor to examine in comprehensivedetail the strategic options available for creating maximum shareholder value within areasonable period of time. The Strategic Advisor has presented various options to theBoard which are being examined in detail. Resolution of IDFC Foundation and the underlyingJVs however remains critical to implement any of these options.
The bank raised additional capital of Rs. 2000 crore during thefinancial year to strengthen its capital adequacy to address challenges arising due toCovid-19. We invested Rs. 800 crore in the preferential offer of the bank to comply withthe regulatory mandate of maintaining promoter stake during the first 5 years ofoperations of the bank. Of the Rs. 800 crore invested in the bank Rs. 600 crore was frominternal resources and the remaining Rs. 200 crore was raised through a loan from aleading housing finance company. The loan has however been fully pre-paid during thefinancial year and the balance sheet of IDFC as on March 31 2021 is debt-free.
Our Bank is now a strong retail franchise focused on retail assets andretail liabilities.
The bank's retail loans (including inorganic portfolio) constitute67% of loans as on 31st March 2021. Retail loans increased 26% year-on-year to Rs. 73673crore as on March 31 2021 from Rs. 57310 crore as on March 31 2020.
The CASA ratio of the bank improved to 51.75% as on March 31 2021 from31.87% as on March 31 2020. CASA deposits increased to Rs. 45896 crore as on March 312021 from Rs. 20661 crore as on March 31 2020 an increase of 122% over the year.
Total customer deposits increased to Rs. 82725 crore as on March 312021 from Rs. 57719 crore as on March 31 2020 an annual increase of 43%.
For the financial year Net Interest Income of the bank increased by21% to Rs. 7380 crore in FY21 from Rs. 6076 crore in FY20. NIM was at 4.98% as comparedto 3.91% in a year ago. Total income for the financial year increased by 24% to Rs.10207 crore as compared to Rs. 8237 crore a year ago.
Our bank's Gross NPA marginally improved by 3 bps to 4.15% as onMarch 31 2021. Net NPA improved by 18 bps to 1.86% as on March 31 2021.
Capital adequacy ratio of the Bank was strong at 16.32% with CET-1Ratio at 15.62% including additional equity capital of Rs. 3000 crore raised through aqualified institutional placement in early part of the coming financial year.
The branch network of the bank stands at 596 with 592 ATMs and 85recyclers across the country as on March 31 2021.
Our mutual fund performed well during the fiscal showing strongmomentum with average annual assets under management growing 19.3% sharply outperformingthe industry growth of 8.6%. Our full-year market share increased to 4.0% in FY21 from3.7% in FY20. We expect that our differentiated strategy will deliver better than marketgrowth in the medium to long term while carefully managing risk to our franchise. We mayhowever witness intermittent periods of wider variance in near-term growth rates relativeto the industry. Our overall financial outcomes reflect a combination of higher core feeincome proactive expense management along with Covid-19 related savings and higherinvestment gains resulting in a best year ever performance from a net profits standpointat Rs. 144 crore.
To conclude notwithstanding a challenging financial year anduncertainties unleashed by Covid-19 our employees have worked very hard to create astrong robust and vibrant platform. I take this opportunity to thank each one of them fortheir sincere efforts.
I also thank each one of you - our valued shareholders for placingyour faith and confidence in us. I look forward to your continued support.
|Vinod Rai |
|Non-Executive Chairman |