Stock Review: Tourism Finance Corporation of India (TFCI)

IFCI Already Owns 33% In Tourism Finance Corp

 

THE counter of Tourism Finance Corporation of India (TFCI) has seen a sharp rise in investor interest following news reports that IFCI would raise its stake further in the company. In the last two trading sessions, TFCI's stock has gained over 17%.

   According to media reports, IFCI, a major shareholder in TFCI, is planning to buy additional shares and gain complete control of the corporation. Currently, IFCI owns 33% stake in TFCI. As per the reports, IFCI is planning to replace an existing board member and induct five new board members for TFCI.

   However, this might be possible only if IFCI has complete control of the company. A week ago, the company's board had rejected IFCI's proposal of changing the chairman and managing director and the induction of three new directors.

   TFCI was incorporated to provide financing to tourism related projects. The management had indicated earlier that it is also planning to foray into the infrastructure financing business.

   The company has shown strong financial performance in the quarter to September 2010. Net profit of the company almost doubled from the year-ago period. The company had reported profit from sale of in-vestments of around . 2.7 crore in the same quarter last year. Removing the effect of this one-time factor, the profit growth in the latest quarter stands much higher at around 180%. The robust growth can partly be attributed to buoyancy in disbursements. Loans to companies grew by around 23.3% in the September quarter year-on-year.

   A concern for investors could be the high capital adequacy ratio (CAR) of the company. TFCI has reported a CAR of around 58.2% as on March 2010, way higher than the stipulated 12%. The high capital adequacy could mean underutilisation of capital. Even though the takeover by IFCI is uncertain, a strong bottom line growth might support TFCI's stock going forward.