IPDC continues to thrive even amid challenging times

IPDC Finance Ltd passed another prosperous year in 2021 when its business environment remained challenging and many of its competitors, including the industry leader IDLC Finance, suffered drops in income and profits.

The transformed non-bank financial institution (NBFI) posted record deposits, loans, income, and profits for the seventh consecutive year.

IPDC Managing Director and Chief Executive Officer (CEO) Mominul Islam thanked the "out-of-box thinking that worked."

Small loans keep growing

As planned earlier, IPDC continued its increasing focus on micro, small and medium enterprises (MSMEs) and retail clients during the pandemic as it found them to be good borrowers and best in terms of utilising the loans.

The CEO of IPDC told The Business Standard that their SME clients were in a financial struggle following repeated lockdowns during the pandemic as they had no contingency fund and many saw their capital squeezed.

"A fresh financing significantly helped them come back and continue repayment of their loans," he added.

IPDC is the only NBFI to have disbursed loans under the government-announced Covid-19 stimulus package within the deadline, Mominul said.

Supply chain financing, which mostly takes place through lending SMEs against the work orders they receive from large corporations, is a secured business model of IPDC and in 2021, its supply chain financing grew by 50% to help its market share in the lending industry to be at 54%.

Reputed corporate partners were asking for more loan support to their supplier SMEs and IPDC responded positively.

Right now, nearly 6,000 MSME customers are availing IPDC's fund of over Tk600 crore in supply chain financing.

Around 10,000 small borrowers have increased IPDC's SME loan portfolio to 27% of the total loan book of Tk6,533 crore.

Retail financing, including affordable housing loans, car loans, and consumer loans, accounted for 23% of the NBFI's total loan portfolio and had a good recovery in 2021, said Mominul.

At the end of December last year, IPDC's corporate loans came down to 50% of the total, from the level of 80% five years ago. Mominul said his firm would bring it down to 25% in the next five years to lend SME and retail loans higher.

On the supply side, IPDC's customer deposits continued to outgrow bank-borrowing, reflecting the increasing trust of around 10,000 customers on its strong balance sheet.

Customer deposits with IPDC grew year-on-year by 20% to around Tk5,000 crore in 2021, while its bank borrowing grew by 5% to Tk1,000 crore.

The reduced cost to income ratio

As revenue grew by 21% and operating cost grew by 7.9%, IPDC's cost to income ratio dropped to 36% last year from over 40% a year ago, thanks to its best use of technology that helps operational efficiency.

The IPDC CEO said in the pandemic situation, branch expansion and infrastructure development were delayed, which saved some costs in 2021 but keeping in mind the capacity expansion for future growth, the firm would continue the development spending at a fair pace.

Classified loan ratio increased, provisioning grew even more

Some of the customers, especially the SME and corporate ones whose shock absorption capacity deteriorated even before the pandemic, were struggling to repay loans in 2021 and like all firms in the industry, IPDC's classified loans increased, said Mominul Islam.

Its classified loan ratio stood at 3.15% at the end of last December, which was 1.38% a year ago.

The firm made Tk35 crore additional provisioning and suspended an additional Tk12 crore interest income for the year to make its balance sheet much stronger, according to its CEO.

He anticipates a better year in 2022 while also being prudently prepared for any adversity in cases of increased stress on his clients' business.

Despite good growth in net profits, IPDC declared the same 12% cash dividend for its shareholders for the year 2021.

The firm aims for 25%-30% growth in its balance sheets with a slower target in profits in 2022.

After opening three branches in 2021, it is planning to add another three this year to make the number of total branches 18.

IPDC shares closed 0.8% higher at Tk36.4 on Monday at the Dhaka Stock Exchange.