 "IDFC expects gross NPA to grow to 1-1.5% over next 1-2 years")
The company is also expecting a lower growth during the current fiscal, due to various challenges, said a senior company official.
Speaking to the investors in the Annual General Meeting of IDFC, Rajiv Lall, executive chairman, IDFC, said, "The guidance we are giving to the market now is that over the next one to two years, from the current 0.35% of gross NPAs, we could reach between 1-1.5%. That said, we have made adequate provisions against the expected trajectory of NPAs. Our provisioning policy is extremely conservative."
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The company had a gross NPA of 0.15% during the year ended March 31, 2013.
The company has done a very diligent job of trying to keep the NPAs very low, he said. Since it is into large scale lending, the average loan size can be several hundred crores, and so the way in which the NPA number might change would not be like in the smooth fashion it happens in retail finance and here, it could grow in a step-wise manner.
"So just under general provisioning, we now have aggregate provisioning as a share of loans outstanding, which amounts to 1.9%; our goal is to take this general provisioning number up from 1.9% to between 2 and 2.2% of loans outstanding over the next 12 months, so that we are adequately covered and it will not be a shock to the P&L even if we see the NPA number track upwards," he said.
He added that for the remainder of current financial year, growth for the company is going to be a challenge.
"The guidance to all the shareholders, is that we hope to grow the balance sheet and the profits of your company for this financial year, by 5-10%. This is compared to last year and the year before that it would be a disappointing performance, but given the circumstances, we feel that this is a realistic target that we can and we will diligently work towards," he added.
The overall balance sheet of the company during the year ended March 31, 2013, grew by 15% to reach a size of around Rs 70,000 crore.
The company is also expected to bring down the Foreign investors shareholding in the company, including Foreign Investment Investors (FIIs) and Foreign Direct Investors, to below 50%, in order to comply with the regulation of RBI before starting its bank, if the regulator approves its application.
IDFC is also in the process of diversifying its portfolio, in order to de-risk since a major share of its operations are in infrastructure sector, at present. Lall said that the company would come up with a clear plan in the next quarter. At present, almost 75% of its business is in infrastructure.
"In order to mitigate risks and secure a more stable growth path, diversification of our asset base and liability profile has indeed become a strategic priority for us. We will pursue new avenues for lending and financing and we will actively explore entry into the banking sector," he added.
As on March 31, 2013, the company's exposure to energy was the highest, of about 41%, followed by transportation which was 25%, telecommunications 23%, and other sectors comprising 11%.