Conference Calls and Earnings Call Transcripts for NSE and BSE Stocks

Conference Call between HDFC AMC Management and Analysts on Q4FY20 and Full Year Earnings Performance and Outlook. Listen in to the full earnings transcript.

Key Highlights

Simal Kanuga, Head of PMS Sales & New Initiatives and Chief IR Officer 

Thanks, team ICICI Securities for hosting this call. We had to delay this call, so apologies for that. So good evening, everyone. We trust each one of you and your loved ones are safe during this extremely unusual times.

I'll start off with a quick overview of the industry followed by key aspects of our performance for the year and quarter ended March 2020. We have Milind and Piyush on the call to take questions then after.

In terms of industry, the quarterly average AUM for the industry stood at RS. 27 trillion for the quarter ended March 2020, a growth of 10% over March 2019. The QA AUM in equity-oriented funds stood at RS. 10.4 trillion, a growth of 7% year-on-year. As against RS. 10.4 trillion of QA AUM in equities, the closing AUM as of March 31 2020 for equity-oriented assets stood at RS. 8.3 trillion. The corresponding closing AUM as of March 2019 was RS. 10.2 trillion. The fall is nothing else, but can be attributed to the fall in markets. The systematic investment plan flows for the month of March 2020 were resilient at RS. 86 billion.

We'll now move to our performance. Our quarterly assets under management for March 2020 was RS. 3,698 billion as against RS. 3,423 billion in March of 2019, a growth of 8%. We have 13.7% market share in QA AUM. Our closing AUM as of March 31, 2020, is RS. 3,191 billion with a market share of 14.3%. More particularly, our QA AUM for the quarter ended March 2020 for actively managed equity-oriented assets was RS. 1,574 billion, while the closing AUM as of March 2020 was RS. 1,200 billion. The fall in closing AUM as compared to QA AUM can be attributed to the steep fall in markets as evidenced by a 23% drop in the NIFTY 50 during the month of March 2020. The rise of markets in month of April has led to an increase in AUM, and our future revenues from equity assets would depend on how markets shape up over the next few months. We now operate through 221 branches. We have 9.4 million live accounts and a workforce of 1,194 people.

Equity as a percentage of our total AUM, which was 48% in March 2019, has come down to 38% in March 2020, again, primarily due to fall in equity markets. Our individual monthly average AUM for March 2020 was 57.2% of total AUM as against 52.2% for the industry.

We continue to be the most preferred choice for individual investors with 15% share in individual AUM. Our unique investor count stands at 5.6 million as against a total of 20.8 million in the industry. Our systematic transaction flows for the month of March 2020 were RS. 11.3 billion across 3.29 million transactions. We continue to be the No. 2 player in B30 market with a share of 11.9%.

We would like to highlight that our business is fully functional and continues the way it has been despite the lockdown. To give you an illustration, in month of February 2020, we did 650,000 transactions. In March, despite the widespread measures taken in terms of limiting workforce, along with eventual complete lockdown, we did 1.03 million transactions.

Slide 15 in our presentation that has been uploaded on our website as well as that of exchanges, provide you a snapshot of how we have handled the situation thus far and the continuing steps that we are taking on the matter.

I'll now move to financials. Before I get into numbers, it would be pertinent to note that there is a significant onetime impact of unrealized loss recognized in the results for the year ended March 2020. This is in reference to our holdings and securities of SL Group. The total unrealized loss recognized in the financial year ended March 2020, stands at RS. 1,203.6 million, that's RS. 120 crores. The carrying value of these NCDs as at March 31, 2020, was RS. 294.21 million. So the residual number is now RS. 29.4 crores. The value of the collateral as of March 31, 2020 is RS. 358.78 million. In the previous financial year, the nonrecurring expenses amounted to RS. 400 million. Keeping this in perspective, we are also disclosing our PBT as well as PAT adjusted for this one-off and nonrecurring expenses.

I'll move to the annual numbers. So for the full financial year, the operating profit for financial year ended March 2020 was RS. 15,129 million as compared to RS. 11,931 million for March of 2019, an increase of 27%. PBT before nonrecurring items for the financial year ended March 2020 was RS. 17,734 million as compared to RS. 14,147 million for March 2019, an increase of 25%.

However, due to nonrecurring items, the PBT for the financial year ended March 2020 was up by 20% to RS. 16,531 million as compared to RS. 13,747 million for March 2019. PAT, again, before nonrecurring items for the financial year ended March 2020 was RS. 13,526 million as compared to RS. 9,613 million for March 2019, an increase of 41%. However, due to nonrecurring items, the PAT for financial year ended March 2020 was RS. 12,625 million as compared to RS. 9,306 million, resulting in an increase of 36%.

In terms of the quarterly numbers, the last quarter of the financial year saw growing uncertainty due to the emergence of the COVID19 pandemic and its effect on markets across the globe. This led to fall in AUMs across our industry, affecting revenues negatively. The operating profit for the quarter ended March 2020 was RS. 3,562 million as compared to RS. 3,534 million for March of 2019, an increase of 1%. PBT before nonrecurring items for quarter ended March 2020 was RS. 4,250 million as compared to RS. 4,244 million for March 2019, an increase of 0.13%.

However due to nonrecurring items, the PBT for quarter ended March 2020 was down by 20% to RS. 3,297 million as compared to RS. 4,146 million as of March 2019. PAT before nonrecurring items for the quarter ended March 2020 was RS. 3,213 million as compared to RS. 2,837 million for March 2019, an increase of 13%. However, again, due to nonrecurring items, the PAT for quarter ended March 2020 was RS. 2,500 million as compared to RS. 2,762 million for March 2019, resulting in a decrease of 9%.

Our operating profit margin as a percentage of average AUM for the financial year ended March 2020 is 41 basis points. The corresponding number for the previous financial year was 37 basis points.

The Board of Directors have proposed a dividend of $0.28 per share, which is subject to shareholders' approval.

Thank you for the patient hearing. Stay safe, everyone. 

Opening Remarks from the Conference Call of ICICI Bank with Analysts on Q4FY20 and Full Year Performance 

Highlights

Joining us today on this call are Vishakha, Anup, Sandeep Batra, Rakesh and Anindya. Thank you everyone for joining us today. Team ICICI hopes that you and your family and your near and dear ones are safe and healthy. We would like to extend our gratitude to all the health care workers, sanitation workers, police and other essential service providers and everyone who has continued to work to keep our society functioning and meet our daily needs, for their immense contribution.

Banking was categorised as an essential service to enable customers to meet their requirements in the physical space, to the extent possible, as well as through digital channels. In these challenging times, our employees have shown strong resilience and the ability to adapt to changing circumstances. The health and well-being of our employees and customers and business continuity is of utmost importance to us.

The Bank formed a quick response team to take steps to protect the health of the employees and provide essential services to the customers. About 97% of the branches were functional with reduced working hours during the lockdown. The branches were staffed based on the customer footfalls and employees were rostered. Excluding the employees working at the branches and some of the team members from Operations and IT, the majority of the employees were working from home during the lockdown period and continue to do so. There is an ongoing thorough risk assessment for augmenting IT security controls and addressing any gaps and potential threats in the current working arrangement.

ATMs across the country remain operational with an average uptime of about 98%. We have also deployed mobile ATM vans for the benefit of the general public residing in and around the containment zones.

Even in this challenging time, we are seeing opportunities to grow and strengthen our franchise and we are using these opportunities to further accelerate the digital journey of the Bank and our customers. In March 2020, we launched a comprehensive digital banking platform called ICICI STACK which offers nearly 500 services to ensure uninterrupted banking experience to our retail, business banking, SME and corporate customers.

Many of these services are first-in-the industry and are available instantly on the Bank’s mobile banking platforms such as iMobile and InstaBIZ or the internet banking platform. These include digital account opening, instant loans, payment solutions, investments and health and term insurance. Small business customers can also use the APIs from the recently launched API Banking Portal to integrate various payment and product solutions. We are seeing increased utilisation of our digital channels and platforms by our customers and have ensured that our IT infrastructure is equipped-maintained to handle any surge in digital transactions. We continue to monitor the situation in the country and would take necessary steps to 4 ensure the safety of our people and continuity of our business operations.

While the first two months of Q4 of 2020 saw business as usual, the month of March was impacted by Covid-19. In Q4 of 2020, our core operating profit increased by 17.6% year-on-year to 71.48 billion rupees. For FY2020, the core operating profit grew by 21.5% to 268.08 billion Rupees. The lower growth in core operating profit in the fourth quarter reflects the high level of interest on income tax refund of 4.14 billion Rupees in the corresponding quarter last year.

Our deposit flows continue to remain healthy. Term deposits grew by 28.6% year-on-year to 4.2 trillion rupees at March 31, 2020 while average CASA deposits increased by 12.0% year-on-year in this quarter. The Bank has been carrying substantial excess liquidity and the liquidity coverage ratio on a daily average basis for the quarter was healthy at about 125% and on an outstanding basis at March 31 was even higher. Deposit flows have continued to be robust and liquidity has continued to increase post March 31. The deposit flows and costs are reflected in the progressive reductions in our MCLR. The loan growth was impacted in March due to Covid-19. The domestic loan book grew by 12.9% year-on-year at March 31, 2020 driven by retail loans, which grew by 15.6% year-on-year. The overseas branches portfolio decreased by 14.4% year-on-year in Rupee terms and 21.7% year-on-year in US dollar terms as of March 31, 2020. The overall loan growth was 10.0% year on-year.

Coming to asset quality, gross NPA additions were 53.06 billion Rupees this quarter. As you are aware, there have been certain developments with respect to a healthcare group based in West Asia and an oil trading company based in Singapore, where the borrowers appear to have been misrepresenting their financial position to the lenders.

Our exposures to both these accounts have been classified as non-performing and substantially provided for in this quarter. Going forward, we do not expect any further impact on the P&L from these accounts. Here one would want to spend a couple of minutes on our overseas business. Since March 2016, the overseas branches loan portfolio has reduced by about 50% in absolute US dollar terms and its share in the total loan portfolio has decreased from its peak of 24% in 2014-15 to about 8% at March 31, 2020.