IFCI: Multibagger PSU Stock Turns Profitable After 5 Consecutive Years of Losses

IFCI, formerly known as Industrial Finance Corporation of India, is an Indian government-owned non-banking finance company which was established to cater to the long-term finance needs of the industrial sector. The stocks fell by 15.08% in 2022; but started seeing some improvements as it gave multibagger returns of 111.23% in 2023. In the calendar year to date, the stock has gained by 101.72%. In May alone, the stock has climbed nearly another third, a move that brings this public sector undertaking (PSU) stock back into focus.

Why is the Stock Back in Focus? Here’s Why!

The key driver for most equity market returns is earnings growth and this was also true for this PSU’s fortune reversal. It had made losses continuously in five years from FY2019 to FY2023 until it became profitable for the first time in FY24. Its consolidated net profit stood at Rs 241 crore in FY24 from a loss of Rs120 crore during FY23. Revenue for FY24 rose by 33.34% to Rs 1987 crore from Rs 1490 crore for the fiscal year ending March 31, 2023.

What were the turnaround triggers for this PSU?

An increase in non-performing assets forced IFCI to shrink its credit extension business recently and expand into advisory services instead; hence its appointment as a project management agency contributed significantly toward profitability achievement. In government advisory, IFCI has been appointed as the project management agency for various product-linked incentives (PLI) schemes launched by the Union government.

Thus, curtailing its lending operations due mainly to bad loans and doing projects such as the ones listed above made IFCI profitable again last fiscal period.

Government Capital Infusion

Earlier in April Government of India infused about Rs 500 crore by subscribing to equity shares of IFCI on a preferential basis at a price of Rs 40.33 per share. There was an increase in the Government’s stake from 70.32% to 71.72% following the allotment of the equity shares.

Government Shareholding has Increased

During FY17, government-owned FCI had a 55.53% holding; this has risen to 71.72%.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.