New Delhi, July 6: Although Andhra Bank has managed to present a clean balance sheet in the run up to its proposed IPO, the bank may have a tightrope walk ahead in order to see its public issue through. While Andhra Bank has witnessed a net profit growth of 20 per cent to Rs 90.04 crore in 1998-99 and written off its accumulated losses by running down the equity (a book entry), the bank's main activity is investment-related rather than loan advances.In 1999, investments were higher than advances. While advances stood at Rs 4523.92 crore, investments stood at Rs 4951.61 crore. Once the bank taps the public, this will weigh heavily in the minds of investors. In fiscal 1998, too, investments stood at Rs 3946.61 crore compared with advances to the tune of Rs 3361.79 crore. However, the the growth in investments is lower at 25.46 per cent compared with the growth in advances (34 per cent).
The bank has been earning profits for the past three years. In FY 1999, the bank posted a higher net profit of Rs 90.04crore against Rs 75.24 crore in 1997-98. The growth in net profit is mainly due to a 16.9 per cent drop in provisions and contingencies from Rs 80 crore to Rs 66.47 crore. But more important, net non-performing assets of the bank have increased to Rs 4.26 per cent against 2.9 per cent in 1997-98. Gross NPAs stood reduced to 9.42 per cent from 9.86 per cent.
The bank has written off accumulated losses to the tune of Rs 243 crore and, as a result, paid-up capital stands reduced from Rs 591.32 crore to Rs 347.95 crore. Despite this, the capital adequacy ratio stood at 11.02 per cent against the mandatory 8 per cent as the bank increased its tier II capital by floating subordinated debt to the tune of Rs 150 crore.
Also, as the bank is sitting pretty on a huge investments, the net effect of risk assets on capital adequacy ratio will be low. Preparing the ground for an IPO, the bank has announced a dividend of 20 per cent after a long period of time resulting in an outflow of Rs 18.1 crore. During the year,the bank has increased its exposure to housing sector in a big way as housing loans rose from Rs 64 crore in 1998 to Rs 191 crore in 1999.
The bank also recorded a 12.4 per cent growth in credit card business from Rs 610 crore to Rs 686 crore. Total deposits showed a remarkable growth of 31.79 per cent from Rs 7920.72 crore to Rs 10,438.74 crore. Total income rose from Rs 1032.48 crore to Rs 1199.99 crore, up 16.22 per cent. The IPO, at a premium, is likely to hit the market before the end of the this year.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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