Stock of the day – IFCI Ltd.

IFCI Stock Movement of Day 

Industrial Finance Corporation of India (IFCI) stock has been generating significant buzz in market due to its remarkable performance & strategic initiatives. Buzzing stock IFCI Ltd, with recent developments & positive outlook, investors are closely monitoring IFCI as potential investment opportunity.
There's no better moment to take advantage of current circumstances & address some of our readers' most pressing queries.
However, you must first comprehend few current IFCI characteristics before we proceed. Since stock price has increased by about 20% during last five trading sessions. This brings its total gains for 2024 to astounding 85%!
Before we get into growth possibilities, let's take closer look at factors that are driving price of IFCI's shares.

Why is IFCI Share Growing?

Firm Becomes Profitable After Seven Prolonged Years!
Main source of present optimism is government-owned NBFC's turnaround, which saw it record profit in FY24 following seven years of losses.
 previous state of company's finances is shown here:

Analysis & Interpretations
• It declared earnings of Rs 3.8 billion in FY16, last time it had posted profit.
• However, business has since turned corner after entering government & private corporate advising sectors.
• After suffering loss of Rs 2.7 billion previous year, company turned profit of Rs 1.3 billion.
• Indian government's production-linked incentive (PLI) schemes were implemented to benefit of IFCI as well.

IFCI Robust Growth Prospects

Investors were hopeful that company would be great turnaround candidate because of its wide portfolio, which includes loans to projects related to manufacturing, services, real estate, telecom, airports, roads, & other related industries. & it's true that IFCI has made significant turnaround, & things appear even more promising going forward.
Since FY22, IFCI has stopped financing due to liquidity issues. However, in 2023, recoveries & impairment reversal caused IFCI's net losses to decline. All that was required for it to potentially turn around its operations was cash infusion from Indian government.

Government gave IFCI Rs 5 billion in April of this year by preferentially subscribing to its equity shares.

 Stock Holding Corporation Holding of IFCI

Six subsidiaries make up IFCI.
• IFCI Factors
• IFCI Venture Capital Funds
• IFCI Financial Services
• IFCI Infrastructure Development
• MPCON
• Stock Holding Corporation of India 

Recently, there have been rumors circulating about IFCI planning to reverse merge with one of its subsidiaries. This subject is being discussed as part of oldest financial institution in India's rescue strategy. Reports state that merger between IFCI & its subsidiary Stock Holding Corporation of India (SHCIL) is highly likely.
In terms of assets under custody, Stock Holding is largest premier custodian in India, largest depository participant, & most profitable company under IFCI.

Also Read: IMF Project that India will Become World 4th Largest Economy

How IFCI Share Price Has Performed Recently

• Price of IFCI's shares has surged by 18% in last five days!
• Its gains for year thus far (YTD) now stand at nearly 85%. Within little more than four months, IFCI is expected to produce multibagger returns.
• 52-week high for IFCI was ₹ 71.7, reached on February 8, 2024, & 52-week low was ₹ 11, reached on May 30, 2023.
• IFCI's shares have increased by more than 330% in last year.

IFCI Peers Comparison 

Analysis & Interpretations

1. Return on Equity (ROE)
IFCI has negative ROE of -3.4%, indicating that company is not generating positive returns on shareholders' equity. In contrast, MAS Financial & Ujjivan Fin. have higher ROE, indicating better profitability relative to equity.

2. Return on Capital Employed (ROCE)
IFCI's ROCE stands at 6.8%, suggesting moderate efficiency in utilizing capital. MAS Financial & Ujjivan Fin. have ROCE values closer to or higher than IFCI, implying better capital utilization efficiency.

3. Earnings Per Share (EPS)
IFCI has lowest EPS among its peers at Rs 0.4, indicating lower profitability per share. In contrast, MAS Financial & Ujjivan Fin. have substantially higher EPS values, reflecting better earnings potential.

4. Trailing Twelve Months Price-to-Earnings (TTM PE) Ratio
IFCI has significantly high TTM PE ratio of 126.3x, suggesting that investors are willing to pay premium for its earnings. However, MAS Financial & Ujjivan Fin. have lower TTM PE ratios, indicating relatively cheaper valuations compared to IFCI.

5. Trailing Twelve Months Price to Book (TTM PB) Ratio
IFCI's TTM PB ratio is 2.6x, indicating that stock is trading at premium relative to its book value. In comparison, Satin Credit & Tourism Finance have lower TTM PB ratios, suggesting relatively cheaper valuations based on book value.

6. Dividend Yield
IFCI does not offer any dividend yield, implying that investors do not receive income from dividends. In contrast, MAS Financial & Tourism Finance provide dividend yields, indicating additional returns to shareholders.

Interpretation

- Overall, IFCI lags behind its peers in terms of profitability metrics such as ROE, ROCE, & EPS. 
- IFCI's high TTM PE ratio suggests that it is relatively expensive compared to its earnings, while TTM PB ratio indicates premium valuation based on its book value.
- Investors may prefer peers like MAS Financial & Ujjivan Fin., which offer better profitability, relatively lower valuations, & potential for dividend income.

IFSCI Revenue Breakup 9M FY24 

Interest Income - 18%
Dividend Income - 23%
Fee & Commission - 27%
Sale of Service - 23%

Conclusion

Stock in news i.e. IFCI presents attractive investment opportunity for investors seeking exposure to India's financial sector. With strong turnaround in financial performance, diversified advisory services, government support, & positive market sentiment, IFCI stock holds considerable potential for long-term growth & value creation. Investors should consider fundamentals & market dynamics while evaluating IFCI as part of their investment portfolio.