Item 2
ICICI Ltd.
ICICI LIMITED - PERFORMANCE REVIEW: FY2001
The Board of Directors of ICICI at its meeting held in Mumbai today, approved
the audited accounts of ICICI (NYSE: IC) for the financial year ended March 31,
2001 ("FY2001"). The Board also considered the consolidated US GAAP financial
statements of ICICI for FY2001.
Results - Indian GAAP
Key Highlights for FY2001
o Gross NPL ratio decreased to 9.9% from 11.1%
o Net NPL ratio decreased to 5.2%, from 7.6%, following the total provisions
and write-offs of Rs. 1,421 crore including accelerated provisions and
write-offs of Rs. 813 crore
o Profit to equity holders, adding back the accelerated provisions and
write-offs of Rs. 813 crore, registered a growth of 21%, increasing to Rs.
1,332 crore in FY2001 from Rs. 1,097 crore in FY2000
o Fee income increased 61% to Rs. 522 crore from Rs. 324 crore
o Approvals up 29% to Rs. 56,092 crore from Rs. 43,523 crore
o Disbursements up 24% to Rs. 31,965 crore from Rs. 25,836 crore
o Loan assets increased 16% to Rs. 56,002 crore from Rs. 48,334 crore
The period under review was marked by environmental constraints. A significant
part of the year witnessed depressed capital markets and volatility in interest
rates and foreign exchange markets. There was continued restructuring and
consolidation in key manufacturing sectors. The business environment was
further constrained by limited response to Government's efforts to attract
investments in the infrastructure sector. There were significant changes in
respect of the regulatory and taxation guidelines including change in criterion
for classifying assets as doubtful, treatment of restructured/rescheduled
assets and revised guidelines for investment valuation.
Notwithstanding the environmental constraints, ICICI's profit to equity holders
registered a growth of 21% (adding back the accelerated provisions and
write-offs), increasing to Rs. 1,332 crore in FY2001 from Rs. 1,097 crore in
FY2000. This growth was recorded despite a higher provisioning requirement of
about Rs. 66 crore - consequent to the revision of the Reserve Bank of India
guidelines whereby sub-standard assets are to be classified as doubtful assets
after 18 months of an asset being classified as non-performing loan (NPL)
instead of 24 months.
From FY2001, ICICI has decided to make accelerated provisions against NPLs as a
more conservative policy. As per this revised provisioning policy, ICICI would
achieve a 50% provision cover against a NPL in an accelerated timeframe of
three years, as compared to the five-and-a-half-year period prescribed under
current guidelines. ICICI's policy is in line with the distinct trend amongst
international banks and financial institutions in emerging markets towards
increasing their provision cover against NPLs. This higher provision could
provide additional cushion to the organization in view of the rising impact of
volatility in the global economy on emerging markets like India.
Accordingly, ICICI has made aggregate provisions and write-offs of Rs. 1,421
crore in FY2001, including Rs. 608 crore made as per the requirements of the
Reserve Bank of India guidelines and the accelerated provisions and write-offs
of Rs. 813 crore. After considering the accelerated provisions and write-offs
Rs. of 813 crore, ICICI recorded profit after tax of Rs. 537 crore in FY2001.
In view of the accelerated one-time provisions and write-offs, the Directors
have proposed to maintain the dividend rate at 55% (Rs. 5.50 per share of Rs.
10/- each) for FY2001.
Business Operations: Loan approvals up 29%
During the year ended March 31, 2001, ICICI's approvals increased 29% to Rs.
56,092 crore, compared to Rs. 43,523 crore in the previous year. During the
same period, ICICI's disbursements increased 24% to Rs. 31,965 crore, compared
to Rs. 25,836 crore in the previous year.
ICICI's strategy of using a client-centric business model by instituting
relationship groups to actively cross-sell the full range of the ICICI Group's
products and services to its clients has yielded the desired results, as
demonstrated by the robust growth in business volumes. ICICI also aggressively
expanded its client base by leveraging its structuring skills, based on a
customized approach.
During the period under review, ICICI continued to improve the risk profile of
its asset portfolio by continued focus on business with better-rated
corporates, structured infrastructure finance and retail business. This was
reflected in ICICI's disbursements to companies rated `A' and above increasing
to 89% of total disbursements in FY2001 from 82% in FY2000. Similarly,
approvals to companies rated `A' and above increased to 92% from 89%.
Asset Quality: Net NPL ratio reduced sharply to 5.2% at March 31, 2001
ICICI continued its two-pronged strategy for reducing the NPLs, including
continuous improvement in incremental asset quality and aggressive settlements
and proactive solutions for existing NPLs and problem loans. The trend in gross
NPLs in the past few years is given below.
Rs. crore
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Mar 31, Mar 31, Mar 31, Mar 31, Mar 31,
1997 1998 1999 2000 2001
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Gross NPLs 2,821 4,212 5,489 6,018 5,988
% increase 48% 49% 30% 10% (0.5)%
Net NPLs 1,954 2,811 3,733 3,959 2,982
% increase 63% 44% 33% 6% (25%)
In addition to the above strategy, ICICI has also made accelerated provisions
and write-offs of Rs. 813 crore against NPLs resulting in a sharp decline in
ICICI's net NPL ratio to 5.2% at March 31, 2001 from 7.6% at March 31, 2000.
The provision coverage against NPLs (provisions and write-offs as a percentage
of gross NPLs) has increased to 50.2% at March 31, 2001 from 34.2% at March 31,
2000.
Retail Business: Consolidating market position
ICICI Group's business strategy in the retail business has been to build a
strong financial services brand, offer a comprehensive range of innovative
products and services across the country, using multiple distribution channels
and provide efficient customer service.
ICICI continued its expansion in the retail business, and the year was marked
by gains in market share in auto loans and home loans, leading to rapid growth
in customer base and asset portfolio. During the year ended March 31, 2001,
ICICI's retail business accounted for 7% of total approvals, up from 2% and 11%
of total disbursements, up from 3% in the previous year.
With the launch of life insurance products, the ICICI Group now offers retail
customers a complete range of financial products and services. Parallely, the
distribution set up for retail products has been aggressively expanded during
the year and at present, the ICICI Group offers automobile finance loans in 70
cities and home loans in 51 cities. ICICI has emerged as the clear leader in
the automobile finance segment and enjoys preferred financier status with
almost all major car manufacturers. ICICI Group has also emerged as a key
player in the housing finance market.
Technology initiatives: Harnessing technology for integrating diverse products
with a customer-centric focus
ICICI has web-enabled all its retail products as well as most corporate
products during the year. In November 2000, ICICI launched the wholesale
finance portal ICICImarkets.com - a platform for offering wholesale products of
ICICI Group online through a common interface. ICICIconnect.com has been
launched to offer retail customers access to all their accounts, retail credit
as well as liability offerings, across ICICI Group companies from a single
login. ICICIdirect.com - online stock trading portal - registered a strong
growth during the year with the number of customers crossing 84,000 at March
31, 2001, representing a market share of over 60% of online trading customers
in India.
Divestment of stake in ICICI Bank
At the time of granting the banking license to ICICI Bank, the Reserve Bank of
India (RBI) had specified that ICICI would have to reduce its holding in ICICI
Bank to 40% over a period of time. ICICI had been in discussions with the RBI
to determine whether and to what extent ICICI may be required to further reduce
its interest in ICICI Bank. During the year, the RBI reiterated its requirement
of reduction of ICICI's holding in ICICI Bank and advised ICICI to draw up a
firm plan for dilution of ICICI's stake.
In line with the RBI's directive to reduce its stake in ICICI Bank to 40%, as a
first step ICICI sold about 10% of ICICI Bank's equity capital in FY2001. ICICI
now holds about 46% of ICICI Bank's equity capital.
Resources
During the year under review, ICICI mobilised medium-term and long-term Rupee
resources of about Rs. 14,692 crore. Of this, about Rs. 2,900 crore was raised
through 7 public issues of bonds to about 18 lac retail investors.
Capital Adequacy
Despite the accelerated provisions and write-offs amounting to Rs. 813 crore,
total capital adequacy ratio was a healthy 14.6% at March 31, 2001 with tier-1
capital adequacy ratio being 9.6%.
Results - US GAAP
During the year, ICICI Bank ceased to be a subsidiary of ICICI. Accordingly,
ICICI Bank has been consolidated as per equity method of accounting for FY2001
unlike the line-by-line consolidation in FY2000. As a result, financial
statements of FY2001 and FY2000 are not strictly comparable.
ICICI recorded net income of Rs. 581 crore (US$ 124 million) in FY2001. Net
income was adversely impacted due to depressed market conditions in equity and
debt markets resulting in gains from trading and capital gains (including sale
of stake in ICICI Bank and ICICI Infotech where the gain is computed on a
different basis vis a vis Indian GAAP) being only Rs. 99 crore in FY2001
compared to a gain of Rs. 495 crore in FY2000. If we exclude income from
trading and capital gains, net income registered a marginal decline of 2% to
Rs. 496 crore from Rs. Rs. 504 crore.
Total assets as per US GAAP were Rs. 73,963 crore (US$ 15.8 billion) at March
31, 2001 with stockholders' equity being Rs. 7,511 crore (US$ 1.6 billion) at
the same date.
Summary Profit and Loss Statement (Indian GAAP)
Rs. crore
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Q4: Q4: Growth FY2000 FY2001 Growth
FY2000 FY2001 % %
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Fund-based income 1,902 2,073 8.9 7,564 8,144 7.7
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Less: Interest and
depreciation charges 1,604 1,766 10.0 6,359 6,845 7.6
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Net fund-based income 298 307 3.1 1,205 1,299 7.8
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Add: Fees and commissions 119 142 19.0 324 522 61.4
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Net income from operations 417 449 7.6 1,529 1,821 19.2
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Less: Operating expenses(1) 88 87 (1.5) 289 337 16.6
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Profit from operations 329 362 10.1 1,240 1,484 19.7
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Less: Provisions and
write-offs 137 276 101.2 462 608 31.7
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Profit before income from
investments and other income 192 86 (55.2) 778 876 12.6
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Add: Dividend 109 40 (62.9) 210 108 48.6)
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Add: Net capital gains 113 347 - 294 344 17.2
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Add: Other income 14 49 - 46 63 36.1
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Profit before tax and
accelerated provision 428 522 22.0 1,328 1,391 4.7
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Less: Accelerated
provision/write-off - 813 - - 813 -
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Less: Provision for tax 33 (34) - 122 40 -
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Profit after tax 395 (257) - 1,206 537 -
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Preference dividend payout 28 - - 109 18 -
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Profit to equity holders 367 (257) - 1,097 519 -
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Profit to equity holders, 367 556 51.5 1,097 1,332 21.5
after adding back
accelerated provisions
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(1) Includes rent and other recoveries from subsidiaries.
Summary Balance Sheet (Indian GAAP)
Rs. crore
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Mar 31, 2000 Mar 31, 2001 Growth %
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Net loans and debentures 48,334 56,002 15.9
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Other Investments 3,075 4,404 43.2
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Current assets 9,136 7,583 (17.0)
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Fixed assets 4,499 5,111 13.6
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Miscellaneous expenditure 346 314 (9.0)
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Total assets 65,390 73,414 12.3
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Shareholders' equity and reserves 8,023 7,973 (0.6)
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Of which: Equity capital 783 785 -
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Preference capital 1,308 350 (73.2)
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Borrowings 50,881 59,835 17.6
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Current liabilities 5,178 5,256 1.5
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Total liabilities 65,390 73,414 12.3
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Except for the historical information contained herein, statements in this
release which contain words or phrases such as "will", "aim", "will likely
result", "believe", "expect", "will continue", "anticipate", "estimate",
"intend", "plan", "contemplate", "seek to", "future", "objective", "goal",
"project", "should", "will pursue" and similar expressions or variations of
such expressions may constitute "forward-looking statements". These
forward-looking statements involve a number of risks, uncertainties and other
factors that could cause actual results to differ materially from those
suggested by the forward-looking statements. These risks and uncertainties
include, but are not limited to our ability to successfully implement our
strategy, future levels of non-performing loans, our growth and expansion, the
adequacy of our allowance for credit losses, technological changes, investment
income, cash flow projections, our exposure to market risks as well as other
risks detailed in the reports filed by ICICI Limited with the Securities and
Exchange Commission of the United States. ICICI undertakes no obligation to
update forward-looking statements to reflect events or circumstances after the
date thereof.
For press queries please call Madhvendra Das at 91-22-653 6812 or
email at das@icici.com
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For investor queries please call Rakesh Jha at 91-22-653 6803 or Sandeep
Guhagarkar at 91-22-653 6899 or email at ir@icici.com
May 3, 2001
END