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Sitanshu Swain
Mumbai, Apr 26: Term-lending institution ICICI has posted a marginal increase in its profit after tax net of extraordinary income at Rs 1,001 crore for the financial year 1998-99, up from Rs Rs 936 crore in the previous fiscal. However, inclusive of the Rs 145 crore extraordinary income generated in fiscal 1998 by way of the sale of ICICI Bank shares and some real estate, the institution has recorded an 8 per cent dip in its net profit (down from Rs 1,081 crore) ICICI has recast its financial statements in accordance with US GAAP with the help of global accounting firm KPMG. Going by the US GAAP, ICICI's net profit (net income as per US GAAP) in fiscal 1999 is pegged at Rs 745 crore.
The primary reasons for the big drop in ICICI's net (as per the US GAAP compared to the Indian GAAP) relate to differences in provisioning norms for non-performing assets, valuation of long-term investments, accounting for mergers as well as front-end fees. The board of directors of the institution, which met in Mumbai on Monday to pass the audited accounts, has proposed a dividend of Rs 5.50 per equity share of Rs 10. The ICICI scrip registered a net fall of 4.78 per cent on Monday to close at Rs 43.80 on the BSE. The GDR was traded at $5.83 on Monday afternoon, registering a decline of 1.27 per cent over the Friday's close.
The GDR is still quoting at premium of 12 per cent over its underlying stock. According to BSE brokers, the actual effect of the results would be witnessed only during the next trading session as the results were announced only after the exchanges closed for trading. The results for fiscal 1998-99 reflect the combined accounts of the merged entity subsequent to the merger of Anagram Finance with ICICI effective April 1, 1998.
The institution's NPAs have gone up marginally by 0.2 per cent to 7.8 per cent in March 1998 from 7.6 per cent in March 1997. ICICI has attributed this to the "widespread restructuring process across Indian industry" which has adversely impacted the asset quality in the financial system.
ICICI managing director and CEO KV Kamath said the industrial downturn has virtually come to an end. "For the last two months, there have been hectic activities in the construction sector... Fiscal 2000 will certainly be a better year," he said. The focus will be on power, roads and ports and oil pipelines, he said. According to the institution, the profit after tax could have gone up but for the general provisioning aggregating Rs 131 crore for sub-standard assets which was charged directly to the profit and loss account unlike the previous year where sub-standard assets were appropriated from the special reserve.
INSIGHT
ICICI's margins have been squeezed, as apparent from the fact that profits before provisions and tax have fallen to 19.9 per cent of total income, compared to 21.6 per cent in 1997-98. Growth in fund-based income has been 27 per cent, and higher fees and commissions have offset the squeeze in margins. Growth in profits before provisions and tax has been 18 per cent for the year, compared to 28 per cent during the first half of the year. The reliance on higher volumes requires more capital, which has been bolstered by the preference share issue. The net NPA ratio has deteriorated slightly over the year. ICICI's dividend of Rs 5.50 per share gives a dividend yield of about 12 per cent at current prices.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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