IPDC Finance has fared exceedingly well in the first half of this year although a quarter has gone through the Covid-19 pandemic.
Established in 1981, the country's first private sector non-banking financial institution reported a revenue growth of nearly 25 percent to a record high amount of Tk130 crore, compared to that in the first half a year ago.
The company's credit rating is AAA.
It has witnessed a significant growth in other major indicators such as deposit, liquidity and provision surplus – all meant for an even stronger position for the company to combat the economic uncertainties brought on by the pandemic.
"Profit growth has been there, but IPDC has set aside 81 percent of its first half bottom line prudently," said its Managing Director and Chief Executive Officer Mominul Islam in a half-yearly investors meet on Sunday evening.
Due to an economic hardship faced by even the best borrowers, nonperforming loans (NPL) may go up in the coming days, and IPDC has a surplus provision reserve of Tk25.7 crore now, he said in the virtual meeting with equity analysts, investors and the financial press.
The NBFI, once suffered the highest NPL rate in the industry, currently maintains the lowest of such loans compared to its competitors.
In April, due to a nationwide shutdown, just 35 percent of the IPDC borrowers came up to repay instalments, while in June, 91 percent borrowers repaid all the instalments and in July, the situation further improved, Mominul Islam said.
IDPC managed to limit the rise of NPL to only two basis points to 1.59 percent over the first six months of the year.
Against 8.7 percent customer deposit growth, IPDC's credit portfolio saw an increase of 0.8 percent in the January-June period while its contingency liquidity cushion grew to over Tk664 crore at the end of June – from Tk493 crore at the end of March.
The liquidity cushion will help IPDC meet any short-term liability instantly and that is very important in terms of confidence in a lender, said Mominul Islam when some investors asked him about the conservative approach of the company to strengthen its financial position.
As the economy is getting over the Covid-19 shock, IPDC – with the help of the further consolidated financial base and unique operational model – will keep lending in the coming days, he added.
Mominul Islam said, "IPDC's revenue grew 25 percent year-on-year to Tk130 crore in the first half whereas operating profit grew by 24 percent to Tk73.5 crore.
"However, to ensure an additional suspense and provision reserve, it posted net profit of Tk31.6 crore – only one percent higher than that in the first half of 2019."
According to the Dhaka Stock Exchange, IPDC posted earnings per share of Tk0.84 for the first half of the year, which was Tk1.04 for the same period in 2019.
The company has recently issued 50 percent right shares with 20 percent premium in 2019 and five percent stock dividends for 2019 alongside disbursing 10 percent cash dividends.
Over the last six months, IPDC made another significant progress in its long-term route to reduce bank dependency for deposits and credit lines for lending business.
Banks now contribute only six percent to IPDC's funds which was nine percent in December last year and 29 percent at the end of 2018.
Currently, the country's NBFI industry is depending on banks for more than one-third of its funds, and banks often pull the lifeline off during a crisis of liquidity or confidence.
IPDC is an example of a significantly transformed financial firm after it got Brac, Ayesha Abed Foundation and RSA Capital on its board following a 2015 divestment of Aga Khan Fund for Economic Development, one of its foreign promoters.
With its enhanced focus on SME and consumer loans, the once an industrial loan provider is now serving the socioeconomic development agenda in Bangladesh.
Strong balance sheet, priority to the previously less focused wider customer segments and also some first of its kind operational platforms together helped IPDC grow at the fastest pace in the industry.
Since 2015, its loan portfolio has grown by eight times while both retail and SME portfolios have grown by around 20 times in the last five and a half years.
Corporate loan's share in its portfolio has come down to 47 percent – from 79 percent in 2015.
IPDC has already emerged as the biggest supply chain financer of the country and that helped its SME loan share in total portfolio to grow to 29 percent from 11 percent five years ago.
Affordable housing and consumer finance grew the company's retail portfolio to 24 percent from 11 percent of the total over the period of transformation.
No capital market exposure also helped IPDC get stronger, while its competitors are suffering from the bearish stock market over a decade.
Despite the significant growth, its operation is slim in terms of brick and mortar establishments. Its branches grew to 12 from six in 2015, while headcount grew to near 900 from 100.
Thanks to investments in digital operational platforms like block chain-based supply chain platform Orjon that can acquire a large number of small ticket customers at a lower cost, operate more efficiently and seamlessly.
In the investors meet, the IPDC CEO said, with the help of collaboration of the stakeholders, the company is already serving 2,500 SME clients through Orjon, and the number is going to be 1 million by 2025.
IPDC is also planning big for its ongoing projects like digital micro merchant financing platform DANA, which will connect 28,000 clients by this year and 1 million by 2025.
IPDC EZ, the digital platform for cardless consumer durables financing, has already found 2,000 customers and expected to gain momentum in the coming days.