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To safeguard transition into a bank on October 1, IDFC on Friday said that it will set aside Rs 2,500 crore to provide for potential stressed loans in the July-September quarter.
The infrastructure finance company has already made a provision of Rs 2,387 crore against gross bad loans as on June end with the first quarter provisions at Rs 69 crore.
“The incremental provisions will impact Rs 1,600 crore on the capital,” Vikram Limaye, Managing Director of IDFC said adding that the provisions will be mainly towards gas and coal based power assets, which make up for 80 per cent of the company’s stressed assets.
The stressed assets – which include non-performing assets, net restructured assets and security receipts — stands at 8.4 per cent of its total loan book. IDFC estimates aggregate stressed assets at about Rs 8,500 crore.
“The nature of problems is not new. We were hoping for solutions which haven’t evolved…With this we will be making an average provision of 50-60 per cent… which are more than adequate from the regulatory standpoint. This is being done so that there is no overhang of the stress from coal and gas based projects on the new bank. We believe that this provisioning is enough to cover for any bad loans arising from the stressed asset portfolio in the future,” Limaye said.
The company also informed the stock exchanges on these provisions.
“The funds for the special provision will come from a special reserve which the company has been maintaining on its balance sheet…Despite this, we will be well capitalised at about Rs 13,000-13,500 crore,” Limaye added.
IDFC’s net profit for the first quarter dipped 47 per cent to Rs 254 crore due to a significant increase in expenses as the company prepares to become a bank. Its’ loan book continued to remain flat at Rs 53,359 crore while average assets under management stood at Rs 69,271 crore.
Net interest income (NII) also fell by 18 per cent year-on-year as the company is focused on lending to high quality credit, which reduced the spreads.
At day’s close, IDFC stock ended at Rs 149.95 per share, down 1.8 per cent over its previous close on BSE.
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