Tourism Finance Corporation of India

Tourism Finance Corporation of India Cluster: CannonballRecommendation: BuyPrice target: Rs30Current market price: Rs19.5
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Result highlights
The net interest income of Tourism Finance Corporation of India (TFCI) declined by 27.0% year on year (yoy) to Rs11.2 crore in Q4FY2008. This was mainly due to a 15.6% drop in the interest income and an 11.0% increase in the interest expenses of the company.
Notably, the operating expenses of TFCI declined sharply by 30.3% yoy during the quarter. The decline was primarily due to a higher base in the year-ago quarter on account of an extraordinary payment of Rs1.0 crore made towards the arrears of employee expenses.
In addition to the decline in the operating expenses, there was a write-back of provisions (for bad and doubtful debt) of Rs10.0 crore, as the same was no longer required. The significant write-back was the primary reason why the bottom line improved.
Lower operating expenses and write-back of provisions boosted the operating profit for the quarter. The operating profit increased by 45.4% to Rs19.9 crore. Hence, the net profit for Q4FY2008 also increased by a strong 60.2% to Rs15.3 crore.
At the end of the fiscal, the sanctions made by the company stood at Rs333.8 crore, up 36.0%. The disbursals also registered an increase of 50.0% to Rs180.36 crore. However, the high growth in the disbursals could not translate into growth of the loan book due to higher repayment of loans.
The loans increased by 6.0% to Rs372.7 crore, breaking the previous five years' trend of declining growth.
The gross non-performing assets (NPAs) stood at Rs61.0 crore on an asset base of over Rs500 crore (advances and investments combined). However, the company has maintained the net NPA level at 0% by fully providing for the gross NPAs.
During the quarter, TFCI raised Rs63.8 crore through the preferential allotment of 1.32 crore equity shares of Rs10 each for cash at a price of Rs48 per share (including a Rs38.0 premium). The capital raising was aimed at enabling the company to finance its future growth.
At the current market price of Rs19.5, the stock trades at 8.2x its FY2009E adjusted earnings per share (EPS) of Rs2.4 and 0.6x its FY2009E book value of Rs34.9. At the existing valuations, the stock still has substantial upside potential and hence we are upgrading it to a Buy with a revised price target of Rs30.