Axis Bank posts ₹7,130-cr profit on healthy deposit, margin growth

DATA FOCUS.

Axis Bank posted a net profit of ₹7,130 crore for Q4 FY24 compared with a net loss of ₹5,728 crore in the year-ago period. Sequentially, the profit after tax was 17 per cent higher.

The year-ago figures are not entirely comparable due to the merger of Citibank’s consumer banking business with Axis Bank with e¯ect from March 1, 2023.

During the quarter, the bank reclassified Covid provisions of ₹5,012 crore as other provisions. Total provisions and contingencies were ₹1,185 crore, of which loan loss provisions were ₹832 crore largely due to the rise in share of unsecured loans in the asset mix, CFO Puneet Sharma said in the earnings call. Axis Bank held cumulative provisions of ₹12,134 crore as of March 2024.

Net slippages for the quarter were ₹398 crore, whereas retail slippages were ₹1,061 crore. Recoveries and upgrades stood at ₹2,155 crore, and the bank wrote-o¯ loans worth ₹2,082 crore. Gross NPA ratio of the bank improved to 1.43 per cent from 1.58 per cent a quarter ago and 2.02 per cent a year ago.

LOAN GROWTH

The net NPA ratio at 0.31 per cent too was better than 0.36 per cent in the previous care sales rose a mere 1 per cent on mid single-digit volume growth. The company has also taken price cuts in this category.

One of its largest segments, beauty and personal care saw flat volume growth with sales shrinking 2 per cent. In this segment, however, premium portfolios grew better than the mass portfolio. For instance, premium skin care saw a double-digit growth.

The food segment saw 4 per cent sales growth mainly due to pricing as the volumes were flat. With commodity prices more or less stable, price growth is expected to be negative in the near to medium term.

For the full year, the company reported a 1.5 per cent rise in net profit to ₹10,277 crore on total income that quarter and 0.39 per cent in the previous year.

Advances grew 14 per cent yo-y and 4 per cent q-o-q to ₹9.7 lakh crore, of which retail loans were ₹5.8-lakh crore, up 15 per cent on year and 7 per cent on quarter. Home loans grew 5 per cent on year, personal loans by 31 per cent and credit card advances 30 per cent. Small Business Banking (SBB) grew 33 per cent and the rural loan portfolio by 30 per cent.

“Our higher yielding focus segments including SME, mid corporate, SBB, rural, personal rose 2.6 per cent to ₹62,707 crore.

STRATEGY

The company has a fourpronged strategy which primarily hinges on premiumisation as that is where the demand is at the moment.

It has identified six high growth bets in which it plans to invest, Chief Financial Officer Ritesh Tiwari said in a media briefing. These categories include sun care, facial cleansing, and serums. It has already built up an over ₹2,000 crore portfolio across these products and plans to scale them further.

These products will be primarily geared towards urban consumers but there are certain categories such as sun care which are also used by rural consumers. “We are loans and credit cards have grown at a CAGR of 25 per cent over the last 4 years and now constitute 43 per cent of total advances, up by 1210 bps over this period,” MD and CEO Amitabh Chaudhry said.

NII UP 11%

Net Interest Income (NII) grew 11 per cent y-o-y and 4 per cent q-o-q to ₹13,089 crore. Net interest margin (NIM) was 4.06 per cent, up 5 bps on quarter.

Deputy MD Rajiv Anand said that corporate loan demand is broad-based across sectors and the pipeline for incremental demand continues to be quite strong. However, given the market conditions, corporates are more incentivised to borrow from the bond market. Axis Bank has capabilities in both debt capital markets and loan origination, owing to

While rural demand has shown improvement over the last several quarters, it is still not accretive to overall FMCG demand. With the forecast for a good monsoon this year, the company is expecting the pace of rural recovery to be accelerated.

Both Tiwari and Jawa pointed out that while urban demand is still outpacing rural demand, the gap between the two has been narrowing over the quarters. On an overall basis with respect to consumer demand in the economy, Jawa said that a gradual recovery was being seen sequentially and “market is slowly returning to normal.”

In response to a specific question as to whether current elevated levels of inflation were a source of concern, Tiwari said that the company had the experience of weathering periods of inflation, deflation, and stagnation and had devised strategies to ride them out. which “income on the wholesale bank side may not come through NII but fee income” for some time as the bank engages with corporates across the capital structure.

The higher transaction banking flows on the wholesale side also led to higher current account flows during the quarter, Chaudhry said, adding that as per what is being seen in the market, deposit growth will remain constrained and liquidity will remain tight as a result of which the loan growth will also reflect the same.

Axis Bank, on its part has taken “deliberate planned steps” to build the strength of the deposit franchise which led to sustained deposit growth through FY24 and is expected to continue going into FY25, he said. Total deposits grew 13 per cent y-o-y and 6 per cent q-o-q to ₹10.7-lakh crore.

The revenue of top tier IT firms TCS and Infosys grew in low single-digits, and Wipro’s declined in FY24. The geographic mix shows the US market underperformed with regard to all three IT majors, but UK, other parts of Europe, and India/APAC regions helped mitigate the impact.

At TCS, FY24 revenue came in at $29.1 billion, growing 4.1 per cent yearon-year (y-o-y) in constant currency (CC) terms. However, revenue from North America — TCS’ biggest market— fell by 0.2 per cent. In comparison, revenues from the US grew by 15.3 per cent in FY23.

800-MILLION DEAL

TCS’ UK revenue, with 16.5 per cent share, grew by 10 per cent in the fiscal and helped boost overall growth. A 15-year deal with insurer Aviva, and an €800 million digital transformation deal with JLR helped TCS in the UK. Interestingly, India, which brought in just 5 per cent of TCS revenue in FY24, grew 20 per cent on the back of a large BSNL deal bagged by TCS. India revenue grew at average 6 per cent in prepandemic years.

Infosys reported a $18.6 billion revenue in FY24 at 1.4 per cent y-o-y growth. The company has a larger share of revenue (60 per cent) from the US compared to TCS and that declined 1.1 per cent in the fiscal. However, Infosys’ revenue from Europe and the rest of the world (APAC markets, MEA etc) grew 6.3 per cent and 3.9 per cent, respectively.

Wipro’s IT services revenue declined 4.4 per cent in FY24 at $10.8 billion. Wipro’s geographic mix is

Americas 1, Americas 2, Europe and Asia PacificMiddle East Asia(APMEA), and revenue from all segments declined.

With US amidst a geopolitical storm and elections , analysts say Indian IT firms will need to reduce dependence on the US market to start showing recovery.

REDUCING DEPENDENCE

Gaurav Vasu, founder and CEO of UnearthInsight, says the top tier IT firms have started increasing focus on regions outside the West, and cites TCS’ India growth in FY24 as an example. “UnearthInsight predicts emerging markets such as Africa, Middle East, India, Southeast Asia and others will grow at a CAGR 8-10 per cent over next 2-3 years for tier-1 IT firms on the back of public sector, corporate and AI deals,” he added.

Ramkumar Ramamoorthy, partner, tech advisory firm Catalincs, says Europe has now matured to the ‘large deals’ stage for Indian IT firms. “The IT services companies have invested in building regional leadership and leveraged acquisitions to grow this market,” he adds. Infosys, for instance, acquired German engineering R&D services firm ‘in-tech’ last week.

However, analysts note that the current climate also makes diversification tough. “Companies are dropping prices to retain large clients; they are hyperfocused on cost reduction to keep margins from dropping,” says Phil Fersht, founder and CEO, HFS Research.

Crisil estimates the IT services sector to see a second consecutive year of sluggish growth in fiscal 2025.