Speaking to CNBC-TV18, Rakesh Bhartia, CEO of India Glycols says the company wait till the end of this quarter for an appropriate government action. Commodity exchange NSEL stopped trading from July-end due to liquidity crisis. (Read More)
According to Bhartia, it is premature to come to the conclusion that there will be no recoveries from this crisis because the government is actively engaged in finding a solution. "It is premature to conclude that the whole exposure would need to be provided for or to be written off, "he says.
Bhartia further added that the total amount invested in NSEL is Rs 125 crore and the company has been investing in various instruments since the past 9-12 months.
Below is the verbatim transcript of Rakesh Bhartia’s interview on CNBC-TV18
Q: Do you have any exposure to National Spot Exchange Ltd (NSEL) because we believe there could be about Rs 150 crore exposures that your company may have to NSEL?
A: India Glycols is not invested directly but we have some short-term surpluses that have been invested through our subsidiary IGL Finance.
Q: The subsidiary was 100 percent owned by India Glycols and does that exposure still stand? In that case, would you write that off and show some losses?
A: Is it not premature to come to the conclusion that there would be no recoveries from this whole crisis because the central government is actively engaged in finding a solution to this crisis. There is a committee that has been appointed and headed by Arvind Mayaram, there have been working groups that have been appointed and the finance minister and the company affairs minister are seeing the matter. So, it is premature to conclude that the whole exposure would need to be provided for or to be written off.
Q: What is the exact amount of exposure?
A: The amount of exposure is in excess of about Rs 125 crore.
Q: Is IGL Finance a 100 percent owned subsidiary of India Glycols?
A: Yes, It is.
Q: You also said that it is premature to write it off but at least in part of the exposure will you consider making a provision?
A: We will wait for the government action till the end of this quarter and the board will then need to evaluate what will be appropriate when we consider our results for this quarter.
Q: What was the need for you to go to NSEL and take this kind of exposure? Is this anyway related to your business?
A: We are in the business of commodities and now all of us are aware that this was an avenue to invest short-term surpluses and earn a reasonable return. The return is being earned based on an instrument which is reasonably free from any kind of market risk. To that extent, I do not see why any investor should not have considered this as an investment opportunity.
Q: For how long have you all been investing in NSEL?
A: I think for about 9-12 months now.
Q: As of now there is no plan to write this off but have you taken in principle stand by what time will you begin to write it off, show it as losses going forward?
A: We will definitely consider this based on the steps taken by the government and when we evaluate our options and also consider our results for the Q2, which is quarter end September.
Q: What has been the recovery as of now?
A: These numbers are now in the public domain. The total recovery so far has been in the region of 3 percent.
Q: For all of you?
A: Not only for us but for the entire investor community whose money is stuck in NSEL.
Q: Have you made any provision, have you provided any amount so far?
A: You need to appreciate, all of this has happened post the declaration of the Q1 results. So, the only time when any kind of provision can be made is post our Q2 results.
Q: Is there likelihood that you will make some provision in Q2 numbers?
A: I would be preempting the board if I were to answer this question right now. This is a decision that would need to be taken by the board.
Q: The income or the money that you all use to make an account of your investments in NSEL would that show up in your other income, in the profit and loss (P&L)?
A: The investment has been made to our subsidiary and not in India Glycols.