Infrastructure Development Finance Company Ltd (IDFC) is India’s leading integrated infrastructure finance player providing end-to-end infrastructure financing and project implementation services.
Infrastructure Development Finance Company Ltd (IDFC) is India’s leading integrated infrastructure finance player providing end-to-end infrastructure financing and project implementation services. The company’s main business is to provide finance for infrastructure projects, including ownership of infrastructure assets.
It is a leading player providing financing for long-term infrastructure projects. The company also has interests in private equity funds, asset management, investment banking and equity broking. IDFC, along with its subsidiaries, is engaged in providing finance and advisory services for infrastructure projects, asset management and investment banking.
IDFC has a strong domain expertise in the infrastructure sector and has positioned itself uniquely to capture significant growth. IDFC is now present across the life cycle of an infrastructure project - debt financing, equity financing through private/project equity, investment banking and strong infrastructure advisory support. We believe such a diversified business model is the biggest differentiating factor between IDFC and its peers.
Risks and Concerns
Higher than estimated slippages in asset quality is a key risk. The company operates in a segment, which is subject to stiff competition from banks, other financial institutions and multinational players, which have access to cheaper funds. Hence, due to competition, if the company is forced to reduce its lending rates, then it might impact its NIMs. Slowdown in the infrastructure sector and delay in projects is another key concern. Significant weakness in capital markets will impact investment banking and other capital market-related businesses.
IDFC is well-placed to monetize the huge infrastructure opportunity on the back of a strong management team with expertise and domain knowledge in the infrastructure space, coupled with diversified business segments.
Healthy asset quality track record and prudent provisioning policy make IDFC better placed compared to its peers in the infra financing space. We believe that the current valuation factors in the concerns over growth and asset quality. Based on the PAT estimates of `180 crore, the stock is trading at a P/E of 9.7x FY13E EPS of Rs 12.14. We arrive at a Book Value of Rs 90 for FY13E. Based on book value estimates for FY13E, IDFC is trading at P/BV of 1.3x, which we believe is attractive. The stock can generate a return of 20% to 25% over a year.
Source: Nirmal Bang's Beyond Market
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