IDFC Bank net rises 6.6% in Q4

Acquisitions in microfinance space on cards

 

Managing Director Rajiv Lall Photo: Suryakant Niwate (File Photo)

India’s newest full commercial lender IDFC Bank reported a 6.6 per cent rise in its fourth quarter profit, as it continued to incur heavy expenses to improve its presence across the country.

The bank has chalked up aggressive expansion plans, including acquisitions of entities dealing with retail clients, mostly in the microfinance space, said Managing Director Rajiv Lall in an interaction with reporters.

Profit for the quarter ended March 31 was Rs 176 crore, against Rs 165.1 crore in the year-ago quarter. In the December quarter, the bank had posted a net profit of Rs 191.2 crore.

The bank aims to be a “mass retail bank,” from its history of being a term lending institution heavily invested in infrastructure. The share of retail should be half of the total loan book in 24 months, said Lall.

The bank said in a statement: “After it transitioned into a bank, IDFC has successfully reduced the concentration risk it earlier carried as a mono-line financial entity focused on infrastructure. As on March 31, 2017, one-fourth of the IDFC Bank’s funded credit was retailised.”

Lall said corporate loans would be important but those from the non-infrastructure space. Even in the corporate space, the bank would focus on working capital loans and other fee-based products. 

The share of infrastructure in bank’s total loan was still heavy at about 54 per cent. That was an aggressive reduction from 72 per cent in the December quarter. Part of this reduction was achieved by selling 14 infrastructure loans for a net of Rs 2,000 crore to asset reconstruction companies in the quarter under review, the bank’s Chief Financial Officer Sunil Kakar said. 

“We are not growing our infra book,” Lall said, “but that doesn’t mean we are not building our corporate business. Most of our incremental lending is to corporates outside the infra sector.”

Gross non-performing assets (NPAs) as a percentage of advances were three per cent and net NPAs were 1.1 per cent for the quarter under review. This is a significant improvement from the third quarter, when the bank’s gross NPA was 7 per cent. The reduction was achieved mostly due to the sale of assets to ARC.

In the next three years, the bank plans to take its customer base from 1.4 million to 10 million. In the same period, the bank plans to increase its 74 branches to 200, about 350 banking outlets (set up through corporate business correspondents) to 2,000 and total payment touch points to 100,000 from 8,000, Lall said.

The bank is also aggressively hiring, and has improved its headcount by 62 per cent in a year to 3,906 direct employees.

While the lender will focus on digital, it will also step up efforts to reach customers through traditional means, to increase the retail share of the bank. Inorganic growth is also on the cards. “We are evaluating everything under the sun. We are actively evaluating several inorganic growth opportunities,” Lall said. 

IDFC had acquired South India-based microfinance lender Grama Vidiyal last year and Lall said the bank was exploring acquisitions in the microfinance space to improve its retail share.  

Net interest margin of the bank was at two per cent, down from 2.2 per cent in the year-ago quarter. For the full year, NIM was at 3.2 per cent. Capital adequacy ratio was at a healthy 18.9 per cent.