industrial development bank of india. presentation outline economic environment idbi performance...
TRANSCRIPT
INDUSTRIAL DEVELOPMENT BANK
OF INDIA
Presentation Outline
Economic Environment IDBI Performance 2002-03 Prospects 2003-04
Industrial Development Bank of India 2
ECONOMIC ENVIRONMENT
Industrial Development Bank of India 3
Growth and Inflation
Industrial Development Bank of India 4
1998-9
9
1999-2
000
2000-0
1
2001-0
2
2002-0
3 GDP GrowthI IP Growth
Inflation Rate
0%
2%
4%
6%
8%
10%
GDP Growth 6.50% 6.00% 4.40% 5.60% 4.40%
IIP Growth 4.10% 6.60% 5.10% 2.70% 5.80%
Inflation Rate 5.90% 3.30% 7.10% 3.60% 3.30%
1998-99 1999-2000 2000-01 2001-02 2002-03
Foreign Trade and Reserves
0
10
20
30
40
50
60
70
US$
Bill
ion
0
10
20
30
40
50
60
70
80
US$
Bill
ion
Exports 33.22 36.82 44.56 43.83 51.70
Imports 42.39 49.67 50.54 51.41 59.39
Forex Reserves (excl.Gold & SDRs)
29.52 35.05 39.55 51.05 71.10
1998-99 1999-2000 2000-01 2001-02 2002-03
Industrial Development Bank of India 5
#
# - April- Feb 2003
Foreign Investment
-2
0
2
4
6
8
10
US$
Bill
ion
FDI Approvals 7.80 6.75 8.61 5.93 3.10
FDI Inflows 2.46 2.16 2.34 3.90 2.40
Net FII Investment -0.39 2.14 1.80 1.34 0.39
1998-99 1999-2000 2000-01 2001-02 2002-03
Industrial Development Bank of India 6
FDI Approvals pertain to calendar years
Primary Capital Markets
0
10000
20000
30000
40000
50000
60000
70000
Rs.
crore
Equity 10372.5 24870.7 14082.2 8165.2 6548.1
Debt 30978.8 40982.7 34276.6 39573.5 33327.6
Total 41351.3 65853.4 48358.8 47738.7 39875.7
1998-99 1999-2000 2000-01 2001-02 2002-03
Data include private placements
Industrial Development Bank of India 7
IDBI
Industrial Development Bank of India 8
Milestones1964
199519941990
1976 1982
Set up by an Act of Parliament as a wholly owned
subsidiary of RBI
Ownership transferred to Government of
India
Export Import Bank
spun off
SIDBI set up as a wholly owned
subsidiary
IDBI Act amended to permit public
ownership
Successful IPO - Government
stake reduced to 72%
Industrial Development Bank of India 9
2001 51% of ownership in SIDBI divested
Further reduced to 58% post capital
restructuring
2002 GoI plans Corporatisation of IDBI
Industrial Development Bank of India 10
Contribution Catalyst for industrial progress
Significant contribution to industrial development in the country »Lending across all sectors – Steel, Textiles,
Infrastructure, Chemicals, Metals, Automobiles, Services
Engineered Capital market development NSEIL, OTCIL, SHCIL, NSDL
Promotional activities Entrepreneurship Development - EDPs, EDII Technological Services - TCOs
Industrial Development Bank of India 11
Strengths Capacity to leverage
High Net Worth and asset base High Capital Adequacy Low DER
Close relation with major clients Brand Equity Dedicated, professional management Well diversified presence
Across the financial sector through subsidiaries Across a wide cross section of industry
Shareholding Pattern
Banks & FIs19.77%
Corporate Bodies4.20%
Individuals17.44%
Others0.12%
Government58.47%
Industrial Development Bank of India 12
As at end March 2003
PERFORMANCE 2002-03
Industrial Development Bank of India 13
Operations
Despite recovery in industrial sector, investment climate remained subdued
Depressed investment climate reflected in sluggish capital market, low demand for project assistance and delayed project implementation
Sanctions to infrastructure sector - Rs.365.4 crore (13.1% of total sanctions, as against 24% in 2001-02)
Incresed flow to services sector – 13% of sanctions and 18% of disbursements
Deliberate corporate strategy to direct fresh funds to prime rated corporates to improve quality of assets
Industrial Development Bank of India 14
2001-02 2002-03(Rs.crore)Sanctions 13656 2950Disbursements 11159 3892
Borrowings Total borrowings during 2002-03 – Rs.10831
crore (Rs.8614 crore) FC borrowings – Rs.497 crore (Rs.209 cr) Rupee borrowings-Rs.10334 cr.(Rs.8405 cr)
Flexibonds - Rs.2183 crore, Omni bonds - Rs.2691 crore, short term instruments - Rs.3792 crore, fixed deposits - Rs.1668 crore
Incremental cost – 8.4% (9.8%) Incremental maturity – 2.75 years (2.64 years)
Industrial Development Bank of India 15
Assets
Focus on acquiring quality assets Prepayments Securitisation of Assets
Aim of de-risking portfolio, asset-liability manage-ment, alternative source of funding, profitability.
In 2002-03, principal outstanding of Rs.583.29 crore securitised without recourse; a gain of Rs.46.75 crore.
Industrial Development Bank of India 16
2001-02 2002-03(Rs.crore)
66643 63116
Profitability Despite sluggish operations and pressure on
margins, Gross Profits increased by close to 32% Profit before tax increased by about 10%
Significant cost cutting, particularly in interest costs, that declined by 13% Prepayments of high cost rupee debt Reduction in cost of FC liabilities Restructuring of liabilities; interest subsidy
Increased capital gains Divestment of holdings in Associates
Industrial Development Bank of India 17
Profitability (contd)
0
100
200
300
400
500
600
Rs.
cror
e
PBT 414.9 455.6
PAT 424.3 401.4
2001-02 2002-03
Industrial Development Bank of India 18
#
# - includes Rs.19.4 crore of deferred tax income## - includes Rs.41 crore of deferred tax income
0.60.6
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2001-02 2002-03
RoA
6.5
5.3
0
1
2
3
4
5
6
7
2001-02 2002-03
RoNW
# #
Financial Ratios
Industrial Development Bank of India 19
8.67.8
0
1
2
3
4
5
6
7
8
9
2001-02 2002-03
12.214.3
0
2
4
6
8
10
12
14
16
18
20
2002 2003
Tier I Tier II
6.5
102.3
6.2
107.1
0
20
40
60
80
100
120
Rs.
2001-02 2002-03
EPS Book Value
DER
CAR
18.0 18.9
Exposure - by Industry
Iron & Steel Elec.Gen. Cott.Text. Telecomservices
Ref&Oil Expl
18.81%
10.46%9.18%
4.41% 4.11%
Rs.9045crore
Rs.5030crore
Rs.4415crore
Rs2118
crore
Rs.1979crore
Industrial Development Bank of India 20
As at end March 2003
Asset Quality
Industrial Development Bank of India 21
2001-02 2002-03
Accelerated provisioning of Rs.2500 crore had brought down the level of NPAs to 11.7% in 2001-02
Net addition to NPAs during the year was Rs.830 crore Higher Provision for bad and doubtful debts –
Rs.1110 cr (Rs773 cr); growth of about 44%
Std88.3
Std85.8
SubStd4.5%
SubStd5.6
Dbt7.2%
Dbt8.6
NPA - by Industry
Iron & Steel Cot.Tex Food (Oth) Metal Pro Chemicals Vehicles
21.18%
13.69%
6.91%5.32% 4.92% 4.90%
Rs.1482 crore
Rs.963crore Rs.486
croreRs.374crore
Rs.346crore
Industrial Development Bank of India 22
As at end March 2003
Rs.345crore
Maturing Assets and Liabilities
Industrial Development Bank of India 23
Upto 1 Over 1 year Over 3 years Over 5 years Over 7 Totalyear to 3 years to 5 years to 7 years years
Rupee assets 11,711 15,547 10,910 9,657 8,987 56,812FC assets 2,517 1,631 1,141 564 451 6,304Total assets 14,228 17,178 12,051 10,221 9,438 63,116
Rupee liabilities 10,553 13,780 4,909 6,034 21,471 56,748FC liabilities 1,621 2,826 1,264 572 86 6,368Total liabilities 12,174 16,606 6,174 6,605 21,557 63,116
(Rs.crore)
Trends in Returns and Costs
Industrial Development Bank of India 24
0
2
4
6
8
10
12
Av.Ret. 11.6 11.1 10.4 10.4 9.8Av.Cost 9.0 9.2 9.0 9.2 8.5Margin 2.6 1.9 1.4 1.2 1.3
1998-99 1999-2000 2000-01 2001-02 2002-03
Industrial Development Bank of India 25
One Time Settlements During the year, IDBI approved 130 One Time
Settlement (OTS) cases Rs.961.3 crore recoverable towards principal,
Rs.101.5 crore towards interest and Rs.2.23 crore towards other charges.
Recoveries made during the year in respect of OTS cases amounted to Rs.398.19 crore (Rs.390.70 crore in the previous year).
Industrial Development Bank of India 26
CDR System Set up in August 2001 CDR mechanism is based upon an effective
co-ordination among banks and FIs CDR system comprises 12 FIs and 49 Banks
27 PSU Banks, 22 Private Sector banks Objectives
Preserve viable corporates Minimize losses to creditors and other stakeholders
Review by high level Kamesam Committee has widened the ambit of the scheme
Industrial Development Bank of India 27
CDR – Activity so far 60 cases referred for restructuring; amount
involved Rs.44595 crore Of the total, 15 applications received in the textiles
sector, 9 in Petrochemicals/ Chemicals, 8 in Steel In 29 cases final scheme approved involving an
amount of Rs.29069 crore 15 cases Restructuring has been rejected;
involving Rs.6405 crore and; 16 cases being processed involving Rs. 9121 crore
Campaign on to increase involvement of banks
Industrial Development Bank of India 28
Action under SRES Act As at end March 2003, IDBI issued notices
under SRES Act to 41 borrowers; aggregate principal outstanding of Rs.1459 crore.
Also, consented with lead institution(s) for action under the Act in respect of 31 more borrowers; principal outstanding Rs.822 crore Of these, 20 borrowers have approached for
amicable settlement of dues and a few of them have submitted One Time Settlement (OTS) proposals
Industrial Development Bank of India 29
Action under SRES Act Apart from these 72 cases, consent of other
creditors sought for serving notice on 28 other cases with aggregate principal outstanding of Rs.492 crore
IDBI has so far seized assets of two units under the Act. However, pending Supreme Court decision on disposal of assets, no recovery has been made from these assets till date
Industrial Development Bank of India 30
Asset Reconstruction Companies Initiatives for Setting up of ARCs
Asset Reconstruction Company (India) Ltd Pilot ARC - jointly sponsored by IDBI, ICICI Bank and SBI; Initial issued and paid up capital Rs 20 crore /Rs 10 crore; IDBI, SBI and ICICI Bank 24.5% each; Balance 26.5% with other private banks
Asset Care Enterprise Ltd. (ACE) Being floated by IFCI; Focus on strategic management of
non-performing and stressed assets For the ARC to be successful
Pricing of assets sold has to be right Banks and FIs need to sell NPAs at a discount to book
value Difficult to recognize losses by selling assets at discount;
Funding of the ARC is an important issue
Industrial Development Bank of India 31
SRES Act - Issues/Problems Validity of legislation challenged
Lenders can acquire assets of defaulting companies but cannot sell these assets
Supreme Court ruling on this issue awaited Working capital lenders keen to decide
sharing modality before giving consents Lender with Performing Assets in its books
hesitant to give consent for foreclosure. Most of the cases involve joint financing
Introduction of ‘lead’ concept can facilitate action to a great extent
Industrial Development Bank of India 32
Asset Restructuring Debt of several companies restructured to
enable smoother repayments Loans to large steel cases restructured as
part of GoI initiative to improve their viability Involves reschedulement of principal and
reduction in interest rates »40% of rupee loan converted to FC with fixed
cost of 8%; some part converted to equity, remaining rupee at 14%
»Compound interest overdue converted to zero coupon loans; simple interest portion converted to CRPS
Industrial Development Bank of India 33
Cost Reduction Sustained efforts to control expenses, mainly
interest expenses, by prepayments of high-cost borrowings During the last three years (2000-03), rupee
borrowings of around Rs.21000 crore repaid Of this, Rs.6840 crore retired during 2002-03 Such prepayments helped reduce interest cost
by Rs.462 crore last year. Interest costs declined substantially over the 3
year period During 2003-04 savings of around Rs.650 crore
expected in interest cost (including benefits of liability restructuring)
Industrial Development Bank of India 34
Liability Restructuring High cost debt of around Rs.17000 crore
from 33 banks and FIs restructured Outstanding debt to carry an interest rate of 8%
beginning March 2003 GoI to bear the interest differential All this debt to be rolled over for its original
maturity at market relevant floating rates Favourable impact on liquidity and
profitability Lower borrowing requirements
Industrial Development Bank of India 35
Divestment of stake in Associates With a view to refocus its activities IDBI
divested some of its holdings Entire stake in Discount & Finance House of India
Ltd. (DFHI) divested » In favour of SBI through a negotiated offer in February
2003» Consideration received Rs.78.6 crore
Exited from asset management activity in March 2003.» Divested entire shareholding in IDBI Principal Asset
Management Company Ltd., IDBI Principal Trustee Company Limited and all Trust Corpus rights of IDBI Mutual Fund to joint venture partner Principal Financial Services Inc. USA.
» Consideration received Rs.94 crore.
Industrial Development Bank of India 36
Risk Management Systems IDBI recognises the critical importance
of an effective Risk Management system Optimum allocation of capital and maximization of
shareholder value core principles of the risk management function
A Risk Management Committee set up Central point for risk management policy
formulation and review in line with RBI Guidelines and requirements of the Basle Capital Accord of the Bank for International Settlements (BIS)
Industrial Development Bank of India 37
Risk Management Systems Credit Risk Management
To devise a rating methodology to evaluate transaction risks of each company / project
Approvals by Executive Committee / Credit Committee / Zonal Committee after assessing risks
Asset-Liability Management A system has been put in place to measure, monitor
and manage market risks. Investment Committee to manage the
Investment portfolio and its associated risks
Industrial Development Bank of India 38
Subsidiaries
(Rs.crore)2001-02 2002-03
Total Assets 75290 74108Income 8990 8584Total Expenditure 7352 6648Profit before Tax 813 777
Consolidated Accounts of IDBI
Industrial Development Bank of India 39
SubsidiariesIDBI Bank Deposits for year ended March 2003 – Rs.6032 crore
(Rs.5234 crore 2000-01); growth of 15% Advances – Rs.4325 crore (Rs.3099 crore); growth of
40% Net Profit 2002-03 – Rs.71.1 crore (Rs.52.4 crore);
growth of 36%; Dividend approved – 12.5%IDBI Capital One of the Primary Dealers accredited by the RBI to
act as a market maker in government securities Secondary market turnover in excess of Rs.100000 crore in G-
secs for the second time; repo turnover in excess of Rs 125000 crore
PBT – Rs.367 crore (Rs. 370 crore); PAT – Rs.228 crore (Rs.234 crore); Interim Dividend – 95%
Industrial Development Bank of India 40
Subsidiaries (contd)IDBI Intech Total Income of Rs.6.13 crore (Rs.7.85 crore); PBT –
Rs.0.44 crore (Rs. 0.42 crore) Set up a 100 seats Contact Center which would
commence commercial production soon Would leverage contact center operations for procuring
BPO assignments. Has tied up with an USA based Company for providing
prospect lists and telemarketing services Awarded the ISO 9001-2002 quality certification by
BVQi. Initiated activities in quality process for CMM Level
3 and the certification is expected to be received by September 2003.
2003-04
Industrial Development Bank of India 41
Industrial Development Bank of India 42
Outlook RBI signaled soft interest rate regime reducing
both the Bank Rate and CRR SRES Act would aid banks and FIs
To release funds locked up in NPAs and also remove these sticky assets from their books.
To bring credit discipline among borrowers. To set up Asset Reconstruction Companies
CDR could be an additional safeguard to protect the interest of the creditors and revive weak but potentially viable units
Industrial Development Bank of India 43
Prospects Improved performance of infrastructure
sector likely to have a positive impact on industrial investment climate
IDBI’s operations would be driven by passing of corporatisation Bill
Likely foray into banking operations October 2003 Level of operations as well as product mix, would
undergo a change accordingly Likely levels of Sanctions and Disbursements
– Rs.7000 and Rs.7000 crore respectively
Industrial Development Bank of India 44
Strategy Present portfolio would continue to have a
dominant position in asset composition Focus on asset quality
Improve recovery from the existing assets to enable migration to a higher level of performance
Selective lending to add quality assets to the portfolio
Effective cost management Continued focus on reducing high cost debt Thrust on increasing retail reach to widen
resource base and bring down costs
Thank You