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.