Friday, January 02, 2009

IDFC CMP 68.45

Fundamental Perspective:-

  • IDFC was established in 1997 as a private sector enterprise by a consortium of public and private investors to provide infrastructure financing. It already accounts for a quarter of the total bank lending to private projects in areas like roads, ports, power and airports. Active association with government in policy formulation has made IDFC a forerunner on the policy advisory space in infrastructure and the preferred investor, lender and advisor. In addition to lending, other focus areas for the company include asset management, private equity, debt finance and syndication opportunities. In FY09, it acquired Standard Chartered Mutual Fund. IDFC has 80% stake in IDFC-SSKI for investment banking and institutional broking.
  • IDFC has concluded the first half of the fiscal on a robust note with a pipeline of Rs 38 bn of un-disbursed but sanctioned loans. The institution has sufficient capital adequacy (22.2% in 1HFY09) and 14% growth in incremental sanctions. IDFC continued to maintain zero net NPA levels.
  • Non-fund based income was stable at 47% in recent results. The institution disburses loans against shares but it does maintain a loan to value ratio of 2 times. That's the reason why recent volatility in stock markets hasn't impacted IDFC's asset book so much.
  • Asset management fees have doubled with incremental revenues from Stanchart's asset management business (IDFC AMC). Investment banking and broking income have fallen by 20% YoY, expectedly so after weak equity markets in 2008.
  • The stock has lost quite a bit of ground from all time high at 235 to recent low at 45. This was mostly on the back of weak broader markets and global financial meltdown. In a recent move, Government has announced a stimulus package of Rs 50,000 Cr to shrug off the slowdown. It is to be a peculiar fund committed to provide loans to infrastructure projects like roads, power plants, ports, airports etc. IDFC can be one of the big beneficiaries of this package. Government is to announce one more such package in the near future, whether infrastructure sector will get a place in it remains to be seen.
  • According to government estimates, over $550 billion will be required for financing the infrastructure projects in India by 2012. Infrastructure is the backbone for any country, and in an emerging super-power like India, it is like a basic necessity for economic growth. IDFC has a private equity arm too, which raises and manages funds that invest in infrastructure companies - this is especially attractive when overall stock and debt markets are in jeopardy. At current valuations IDFC is quite undervalued and promises a nice margin of safety for investors.

Technical Evaluation:-

IDFC is in an ascending triangle and will break-out above 75. Buy at CMP and keep accumulating in dips for target of 89-92 in 2-3 months.

1 comment:

materials said...

Although from different places, but this perception is consistent, which is relatively rare point!
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