For a detailed presentation on the performance in the past nine months, download the Powerpoint file Investor.ppt

Performance Review - Nine months ended December 31, 1998

The Board of Directors of ICICI at its meeting held in Mumbai today, approved the audited accounts of ICICI for the nine-month period ended December 31, 1998.

ICICI's Profit after tax for the nine-month period ended December 31, 1998 amounted to Rs. 726 crore, which represented an increase of 17% over the corresponding figure of Rs. 622 crore (excluding extraordinary income and adjusted for ITC Classic's losses) for the nine month period ended December 31, 1997.

ICICI made substantial provisions and write-offs (including write-down of equity investments) of Rs. 302 crore during the period under review, representing an increase of 53% as compared to Rs. 197 crore for the nine months period ended December 31, 1997. ICICI believes that any deterioration in individual credit facilities should be recognised to the greatest extent possible through the establishment of specific allowances. Accordingly, in respect of certain assets, which are presently under stress, ICICI has made additional provisions over and above that required under the existing prudential norms.

In a period marked by environmental constraints primarily on account of the impact of depressed global markets, ICICI was able to register an improved performance by continually redrawing its business parameters and redefining its approach to developing quality business.

During the third quarter ended December 31, 1998, the profit before tax and provisions (including write-down of equity investments) was Rs. 342 crore as compared to Rs. 298 crore (adjusted for ITC Classic's losses) during the corresponding quarter last year, registering a growth of 15%. ICICI made provisions and write-offs (including write-down of equity investments) of Rs. 113 crore during the third quarter ended December 31, 1998, as compared to Rs. 68 crore in the corresponding quarter last year, representing an increase of 66%. Notwithstanding the enhanced provisions and write-offs to the extent of Rs. 45 crore, profit after tax in the third quarter ended December 31, 1998 was maintained at the same level of Rs. 208 crore as the corresponding quarter last year (excluding extraordinary income and adjusted for ITC Classic's losses).

Financial Highlights

Note: The results for the nine months ended December 31, 1998 include results of ITC Classic as a part of regular operations. To facilitate a meaningful comparison, results of ITC Classic has been included as part of regular operations in the results of both nine months ended December 31, 1997 and of FY:97-98, merger being effective April 1, 1997. A comparison of results of nine months ended December 31, 1998 with the results of nine months ended December 31, 1997 may not be strictly appropriate as the adjustment for alignment of accounting policies of erstwhile ITC Classic with those of ICICI has not been done. The extraordinary income comprises income on sale of ICICI Bank shares and sale of real estate.

Business Operations

As the Indian economy continues to be buffeted by trends in the global marketplace particularly in the commodities markets, the operating environment has undergone a major shift. Indian corporates are coming to terms with the new competitive reality through a process of restructuring and repositioning. While this phase of restructuring may show some signs of stress in certain industries, it is a process that corporate India has to pass through. ICICI is dealing with this situation in various ways. These include facilitating the integration of fragmented capacities, catalyzing the merger of weak and unviable units into strong and viable ones, encouraging modernisation of existing plants through technology upgradation, financial restructuring and taking early steps for legal action where necessary. ICICI believes that all these measures will enable the industry and economy to emerge stronger once the restructuring process is complete.

The growth momentum achieved by ICICI during FY:97-98, was maintained during the nine months ended December 31, 1998.

ICICI continued its focus on the infrastructure and corporate finance segments leading to a healthy business growth and an improved risk profile of the asset portfolio. In keeping with this, the infrastructure and oil & gas projects together with non-project corporate finance assistances aggregated 82% of approvals and 74% of disbursals for the nine-month period ended December 31, 1998.

Fee and commission income aggregated Rs. 178 crore and registered a strong growth of 45% during nine months ended December 31, 1998.

In line with ICICI's strategy of providing funding across the maturity spectrum, during the nine months ended December 31, 1998, STPR (Short Term Prime Rate) and MTPR (Medium Term Prime Rate) related disbursals accounted for 24% and 12% of total disbursals, respectively. However, long term funding continues to be the primary activity of ICICI with LTPR (Long Term Prime Rate) related loans accounting for 55% of total disbursals. Foreign currency loans were only 6% of total disbursals reflecting the lower demand for foreign currency funds due to the volatile foreign exchange market. The balance 3% of total disbursals comprised deferred credit, leasing, asset credit and other forms of assistance.

Asset Quality and Recovery out of Collateral

The net NPA ratio declined from 7.8% as on September 30, 1998 to 7.5% as on December 31, 1998. The net NPA was Rs. 3,343 crore as on December 31, 1998. The net NPA has increased by Rs. 103 crore during the quarter ended December 31, 1998 as compared to an increase of Rs. 429 crore during the half-year ended September 30, 1998. The perceptible slowdown in the increase in NPAs is on account of a proactive approach towards cases under stress.

ICICI has placed great emphasis on recovery and settlements in respect of bad assets and this focus has been institutionalised across the organisation. In fiscal 1997-98, ICICI recovered an amount of Rs. 300 crore through settlements of 105 cases. This performance has been maintained in the current year. During this period principal dues aggregating Rs. 220 crore have been collected (Rs. 164 crore in the corresponding period last year). Moreover, simple interest dues aggregating Rs. 43 crore (Rs. 25 crore) have also been collected.

Our experience shows that we have recovered almost 100% of principal on a cash basis and about 70% on a present value basis whenever we have negotiated a settlement. This experience has not been one-off and has been sustained over the last two years. The settled amount has been substantial as aggregate settlements were Rs. 563 crore during the 21 month period from April 1,1997 to December 31,1998.

The strong collateral against ICICI's loan assets has been the critical factor towards the success of ICICI's recovery efforts. In respect of existing NPAs of Rs. 3,343 crore, ICICI has a collateral against Rs. 3,311 crore. ICICI's present NPA portfolio has to be viewed in this perspective.

Creation of Special Asset Management Group

To provide a sharper focus towards effecting settlements and recovery from bad assets, ICICI has formed a Special Asset Management Group. This Group has presently 20 large cases in its portfolio and is working in close association with other financial institutions and commercial banks to reach early settlements.

Resources

During the nine-month period ended December 31, 1998, ICICI mobilised medium and long-term rupee resources of about Rs. 11,777 crore (In addition, short term borrowings raised and outstanding were Rs. 2,747 crore). Another Rs. 206 crore was raised by way of foreign currency borrowings. During this nine-month period ended December 31, 1998, ICICI mobilised Rs. 2,095 crore through five public issue of bonds from about 6.3 lac retail investors. This clearly reiterates the positive sentiments of the investor, particularly the retail segment, in savings instruments issued by ICICI.

Capital Adequacy

Capital adequacy ratio was at a healthy 13.9% as on December 31, 1998, of which Tier2 capital accounted for 9.1%.

Summary Profit and Loss Statement

Summary Balance Sheet

Mumbai
January 29, 1999