A large dose of one-time income from a sale of investments will help the Industrial Credit and Investment Corp of India Ltd (ICICI) post a near 50 percent rise in net profit for the six months to September 30, 1997, analysts said on Monday.
The board of ICICI, India's second largest term lending bank, meets on Tuesday to finalise accounts for the first half of the fiscal year ending March 31, 1998.
Analysts estimate ICICI's net tax profit for the first half at around Rs 450 crore compared with Rs 266 crore in first half 1996/97.
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ICICI had showed a flat net profit growth for the first half of 1996/97. Analysts expect ICICI to post a flat 20 per cent growth in business volumes in the first half of the current fiscal.
"But this is good considering the fact that credit growth of term lenders and commercial banks has been dismal this year," said an analyst at an Indian securities firm.
Last week, ICICI said its loan disbursals in the first half rose to Rs 668.4 crore from Rs 552.7 crore in the year-ago period. Loan approvals showed an 87 percent rise to Rs 1156. 5 crore during the same period, it said in a statement.
ICICI said a three-pronged loan product structure -- short-term, medium-term and long-term helped drive loan growth.
"Banks have not been lending to meet working capital requirement of companies," said an analyst. "ICICI has taken advantage of this to lend short-term," he said.
"Thirty to 40 percent of their loan growth should come from working capital loans," he added.
But some analysts said ICICI had taken up poor quality assets to show short-term gains. "This will lead to problems later," said an analyst at a foreign firm.
"Any bank can show short-term growth," agreed an analyst at a foreign brokerage. "But over a year, the quality shows up." (Reuter)
Even if one assumed ICICI's working capital borrowers were sound, this is "opportunistic lending" which cannot be sustained over the long term, other analysts said.
ICICI's core area - long-term lending - had suffered because of a slowdown in new industrial investments, analysts said.
A bunch of one-time receipts from sale of investments will help ICICI show a net profit of as much as Rs 48o crore, an analyst at a European securities firm said.
He expected ICICI to post an income of Rs 9.4 crore from sale of 25 per cent holding in its fully-owned subsidiary ICICI Bank.
ICICI sold 41.25 million shares of Rs 10 at a premium of Rs 25 a share, which was fully subscribed.
ICICI also sold around 100,000 shares of a premier housing finance company along with several other company shares this year, analysts said.
"We don't know why they had to sell when the (stock) market was falling," said an analyst. (Reuter)