Business Model of IDC

``: 

`` Manashvi shah

Current Scenario: 

Current Scenario Poor credit offtake Large amount of restructuring Ample liquidity but margin under pressure due to under deployment of funds PSBs getting aggressive & private banks consolidating

Business Outlook: 

Business Outlook Credit growth remained muted Poor monsoons, rising inflation, interest rates can impact growth prospects Govt. can announce another package for the farm sector Credit demand as expected may not take off in 2HFY10

PowerPoint Presentation: 

Margins under pressure Inflation pressure and hardening G-Sec rates Asset quality remains a key concern Target market still expanding Credit demand will remain robust as India gets into a capex mode

Porter’s Five Forces Model: 

Porter’s Five Forces Model Threat of new entry Absolute cost advantages Learning curve Threat of substitute Buyer inclination to substitute Switching cost Buyers’ power Buyers’ power Bargaining leverage. Buyers’ information. Suppliers’ power Suppliers concentration Input differentiation Degree of rivalry Low concentration Low switching cost Exit barrier

Budget impact: 

Budget impact Receive government funding agriculture credit flow 'Banking Cash Transaction Tax (BCTT)‘ Debt Waiver and Debt Relief Scheme extended Bond yields up on additional spending plan

Business model: 

Business model

: 

Revenue Non interest income 11% Retail 24% Corporate 76% Fee 6% Interest Income 89% Treasury 4% SME 22% Agriculture Loan 25% Personal Loan 52% Infra 26% Long/ Medium Loan 74%

PowerPoint Presentation: 

Cost Demand Deposit 10% Interest Expense Operating expense Savings Deposit 5% Term Deposit 85% Employee Cost 43% Others

Business strategy : 

Business strategy Optimize mix of corporate and retail banking. Focus on fee based income to boost profitability Increase in the relative share of low cost deposits (CASA) in total deposits Organic and Inorganic growth. Reorient human resources through continuous training Cross-Sell the entire bouquet of bank’s products Emphasis lending to agriculture, micro-finance and SME’s Leverage core competency in project financing

Comparison with Peers: 

Comparison with Peers

Risk Analysis: 

Risk Analysis Credit Risk Real Estate 15% Power 12% Iron and Steel 11% Essar oil ltd 14.35 IDBI home loan finance 16.35 Ispat industries ltd 16.3 Larsen&Turbo ltd 14.43 Reliance industries ltd 13.41 Videocon industries ltd 14.54 Actual Required CRAR 11.57% 9.00% TIER-| 6.81% 6.00% TIER-|| 4.76% Risk weight Rs crore Less than 100% 118708.65 100% 68684.67 More than 100% 14742.11 Total 202135.43

PowerPoint Presentation: 

RISK Market risk Operational risk Technology risk Liquidity Interest rate Foreign exchange rate

Positive: 

Positive Diversified customer profile Change in liability mix has improved NIM Improving asset quality Strategic investments: The Hidden Value High Credit ratings Reduced deposit rate

Negative: 

Negative Company needs huge capital infusion for its aggressive growth. Downturn in capital market may have impact on its strategic investment. Interest rate are creeping up this may adversely effect its profitability. Low credit/deposit ratio. Large restructured assets

P/E Ratio Analysis: 

P/E Ratio Analysis Mean PE of comparable firms in the sector is 5.58 Book value for FY09 is 130 > then current market price of 115

Future Prospects: 

Future Prospects Expansion of Retail Business Addition of New Products Expansion of ATM Network Introducing two-factor authentication for its I-net banking service Enabling remittance of funds by MasterCard holders to MasterCard recipients.

PowerPoint Presentation: 

Additional variants of the debit card Increasing exposure to SMEs Making a foray into the overseas markets Aspiring to make IDBI the fifth largest bank by 2012 with Rs 5 lakh crore in business and Rs 80,000 crore in market capitalization