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IDFC + CONCOR Results

October 15, 2007

IDFC’s reported standalone net profit for 2QFY08 of Rs1.79 bn, up 27% yoy but 8% below estimates. IDFC’s net operating income was up 43% yoy, mainly supported by strong loan growth, likely stable spreads but higher NIMs—on the back of recent capital issuance. Standalone fees, a lumpy income stream, have grown considerably but below estimates. The company has booked lower-than-expected capital gains during the quarter. While provisions have been higher, reported operating expenses were lower as IDFC adjusted share issue expenses with share premium account.

Container Corporation of India [CONCOR] reported revenues of Rs8,188 mn (up 6.4% yoy) and PAT of Rs1,742 mn (down 8% yoy). Operating margins reduced significantly – by 690 bps on a yoy basis to 25.9%. Exim volume growth at 12.6% was lower than our expectation of 14%. This was despite the discounts given on FEUs in an effort to take traffic away from roads. However, domestic volume growth at 38.4% was a positive surprised (we expected 15%). The steep margin decline is attributable to discounts, higher number of empties (due to imbalance in exim trade and repositioning of containers in the domestic segment) and additional charges by Indian Railways. 5 competitors have commenced operations. Volumes and margins of Concor are likely to be affected as competitors scale up. Fresh and Healthy, Concor’s cold chain subsidiary is likely to start sales from January next year. Kotak has a revised Target Price of Rs 2200 on CONCOR.

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