CLSA conference highlights: ICICI Bank, IDFC, Zee Entertainment
Munira Dongre 15 September 2010

CLSA is hosting a corporate conference in Hong Kong for its institutional investors. Here are a few highlights from the ICICI Bank, IDFC, and Zee managements

MD and CEO of ICICI Bank Chanda Kochhar talked about the bank's new strategy - an addition to its '4 Cs' strategy in the form of credit growth (CASA ratio, credit quality, cost control and customer service are the other Cs). Last year, ICICI Bank had deliberately gone slow on credit growth to get its other Cs under control. She expects the bank's loan book to grow by 18% in FY11, largely domestic (FY10 loan growth was -17%). She also expects margins to expand due to higher CASA ratio and improving pricing power. RoA expectations are 1.4%-1.5% over the next 2-3 years (currently 1.1%).

About the Bank of Rajasthan (BoR) merger, ICICI Bank said that nearly 3,900 BoR employees have been integrated into ICICI's employee base - which means some additional provisions on staff costs in 2QFY11. For BoR, it has already restarted retail deposit mobilisation and loan processing and IT systems will be fully integrated by March 2011.

ICICI Bank believes that in its life insurance business it can hold NBAP (New Business Achieved Profits) margins near 16% and that the contraction in NBAP margins will stabilise at 200-300bps. It expects 15% new business premium growth in FY11 and to maintain its market share.

In line with the huge rally in banking stocks, ICICI Bank rose from a low of Rs833 early July to Rs1,100 levels currently, a huge 32% rise in just 3 months. 

MD and CEO of IDFC, Rajiv Lall said that he expects a strong 30%-40% compounded annual growth rate (CAGR) in loans over the next 3-4 years, which will entail tripling its balance sheet. The infrastructure finance company status will help IDFC to lend to larger projects and improve access to funds from banks (risk weight on its credit rating falls from a flat 100% to 20%, which mean more funds), ECBs (cost is lower) and retail sources (it can issue tax-free infrastructure bonds). IDFC is also looking at improving its fee income from infra-lending and retail channels.

From a low of Rs150 early June, IDFC is now trading at Rs191 levels, an almost 30% rise in just under 4 months.

Zee Entertainment's management said that they are looking at DTH (Direct to Home) as a big opportunity. CLSA expects India's DTH subscribers to jump to 52 million by FY13 from 23 million currently, and expects Zee's domestic subscription revenues to grow by a 17% CAGR over FY10-12. DTH makes up for only 22% of the country's current pay TV homes and the subscription revenue share of broadcasters is even lower at just 10%-15% with the rest cornered by local cable operators. Zee believes that the sunset date for digitisation of 31 December 2013 is ambitious and will be delayed. Of late, Zee TV's viewership ratings have slipped and the channel is now ranked No 3 behind Star Plus and Colors. However, the management said that it is introducing new shows in Zee TV which it hopes will drive advertising revenues.

Zee's share price has been oscillating between Rs270 and Rs325 for the past few months.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).

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