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IDFC Q1FY15 Results Analysis

IDFC has been making it to the news after the company got a banking license and a few benefits in the budget. However the June quarter results of the company have not been very encouraging. For June 2014 quarter IDFC reported a 13.6 percent decline in consolidated net profit at Rs 481.7 crore as compared to Rs 557.3 crore in corresponding quarter of last fiscal. If we take a deeper look into the results, financials were mainly impacted by higher expenses (especially due to provisions) but supported by other income and lower tax cost. 

To put the figures in perspective, consolidated total income from operations declined, too, during the quarter at Rs 2,122.5 crore, down 7.6 percent compared to Rs 2,298 crore in the year-ago period. While on one hand topline declined, the asset quality also declined. Asset quality of the company worsened with the gross non-performing assets (NPA) rising 8 basis points sequentially to 0.64 percent and net NPA growing 6 bps to 0.43 percent in the quarter ended June 2014 but that was still below the guidance of 1 percent to over 1 percent given by the management. 

Total expenses jumped by 31 percent to Rs 258.94 crore in first quarter of current financial year 2014-15 from Rs 197.61 crore in same quarter last fiscal due to higher provisions while other income saw a substantial increase at Rs 66.6 crore in Q1FY15 as against Rs 0.57 crore in Q1FY14. 

Provisions increased 3.4 times year-on-year to Rs 203.9 crore during the quarter but declined 57.7 percent sequentially. The lender has reported a write back of Rs 79.67 crore on the depreciation and amortisation front as against expenses of Rs 7.62 crore in corresponding quarter of last fiscal due to change in depreciation method according to new Companies Act 2013. Tax expenses of the company dropped 46 percent to Rs 141.60 crore in the quarter ended June 2014 compared to Rs 262.71 crore in the year-ago period while finance cost jumped to Rs 1,302 crore from Rs 1,277.5 crore during the same period.

As regards the street estimates, the set back on the bottomline front was anyway expected. However the estimates were to the tune of 10-12 %. We feel, the scrip is likely to witness some amount of decline on the bourses in near term. But it should be taken as an opportunity to buy the scrip for a long term. 

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