IDFC, which will soon become a bank, could see a hike in costs and provisions in the first half of FY16 as the infrastructure sector continues to see challenges.
“In the transition to becoming a bank, operational expenditure and capital expenditure have been increasing as we are hiring more people,” said Vikram Limaye, MD and CEO, IDFC.
“For the first half, we expect flattish loan growth… We have been focusing on low-risk operating assets and they come necessarily on lower spreads,” he added.
Limaye believes that the risks in the power sector have not come off as expected. “The gas framework announced (by the government) is still being evaluated in closer detail. The initial evaluation indicates that the current framework would not result in gas-based plants being able to service their entire debt.”
Provisions saw an 81 per cent spike to ₹2,319 crore for FY15 as against ₹1,284 crore.
Limaye said, “Unfortunately, the risks surrounding the power sector haven’t really come off the way we expected. So, from that perspective, we will continue to make provisions for the next couple of quarters as we are outlining till we become a bank so that all the risks that we are aware of are adequately covered.”
Financial performance On Thursday, IDFC reported a 48 per cent jump in consolidated net profit for the fourth quarter ended March 2015 at ₹382 crore.
For the full year, the profit increased a marginal 5 per cent to ₹1,707 crore.
IDFC is in transition to becoming a bank by October first week pending High Court approval. “It should be done by the end of July or August.
“Hard to give a number on the loan growth outlook as half the year will be in an NBFC framework and half as a bank,” said Limaye.