IFCI Ltd. has been engaged in recovering its NPA and has been looking to expand its lending business. In this backdrop, results posted by IFCI for quarter ending September 08, can only be seen as improving its networth and rationalisation of organization, so as to attract a prospective investor into the institution.
During Sept 08 quarter, total income was placed at Rs.383 crores against Rs.693 crores of H1 FY 09. Net profit for the quarter was at Rs.259 crores while it is at Rs.410 crores for HI FY 09, resulting in an EPS of Rs.3.38 for the quarter and Rs.5.35 for first half.
The shareholders of the company, in its AGM held on 12-09-08 have approved reduction of share capital (which now stands at Rs.762 crores) for aligning the stake of LIC to 8.59%, which is now placed at 11.35%. Book value per share as at 30-09-08 is placed at Rs.35 CEO and MD of IFCI has stated that process of inducting a strategic investor is likely to happen in the next 3 – 4 months. With present financial turmoil, the stock has taken a beating, below its book value, to Rs27. With clean balance sheet and huge network, with about 4.50 lakh sq. feet of owned commercial premises and 7 lakh sq. feet residential premises, the stock would see valuations coming back at an appropriate time.
Though FY 09 would have an EPS in excess of Rs.10 but that is mainly from its NPA recovery and from non-recurring nature. Still, no need to look at the results as the trigger for the stock would be induction of strategic investor, which would make share to discover its correct value.
At Rs.25 stock has limited downside with prospects to rise by about 20% to 30% in the next couple of months.
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