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IDFC – Good Quarter but Challenges on the Road Ahead

July 21, 2008

IDFC’s 1Q09 profits were up 20%.The quarter itself was strong – characterized by high loan growth, expanding margins, strong asset quality and supported by growing AUMs and gains on equity investments.

Loan growth at 42% was strong and complemented by equally strong asset quality (no delinquencies in the quarter). NIMs expanded slightly (+10bps QoQ) – ahead of expectations in a difficult quarter.

Management, however, warned of macro headwinds and a rise in risk aversion that would significantly impact the trajectory of loan growth going forward. Management clearly indicated a shift in focus from growth to capital preservation, containing asset risks and maintaining spreads. Cost control will also be a key focus area.

IDFC is expected to report a full year EPS of Rs 6.16.

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