Mar 21, 2013, 03.47 PM IST
Bank of India has a loan exposure to HDIL. However, N Seshadri, ED, Bank of India told CNBC-TV18 that their exposure is very limited and it is not concerning.
Our exposure is very limited and we do not see much of a concern at this point of time because there has been servicing.
Bank of India which came under focus over its exposure to realty developer HDIL , said it was of little concern. N Seshadri, ED, Bank of India told CNBC-TV18 that their exposure to HDIL is very limited.
"Our exposure is very limited and we do not see much of a concern at this point of time because there has been servicing. We are looking at the portfolio very closely, although at a very small portion of a percentage of that overall exposure. It is not significant, but we do have some concern in terms of delayed servicing of interest," he added.
Credit rating agency CARE had downgraded the Non-Convertible Debentures (NCD) of Housing Development and Infrastructure ( HDIL ) citing delay in servicing debt obligations.
Here is the edited transcript of the interview on CNBC-TV18.
Q: We saw CARE ratings downgrade the Non-Convertible Debentures (NCD) of Housing Development and Infrastructure (HDIL) and we heard that Punjab National Bank (PNB) was not paid the interest on the NCDs that it holds. You are also a loanee to HDIL. Have you had any problems of late payments? Is the loan itself in danger of getting into Non-Performing Loan (NPL) status?
A: We have been seeing some amount of stress on this sector in terms of meeting the commitments, largely because of the inventory which is not getting cleared as envisaged and there are definitely interest rate issues. There is strain. There has been some amount of delays if not outright defaults.
As far as ratings are concerned, definitely there has been downgrading which is happening across the borrowers in the sector, largely on account of the concerns in terms of outflow.
Q: It is a default status. CARE Ratings has given them a D rating compared to BBB plus which they enjoyed earlier. That is a one-shot steep rating downgrade. Do you hold any of those NCDs?
A: Another rating had also reduced it to default even a couple of months back and now it has been confirmed by another agency. We have seen default rating confirmed on the borrower that you had mentioned. Our exposure is very limited and we do not see much of a concern at this point of time because there has been servicing.
We are looking at the portfolio very closely, although at a very small portion of a percentage of that overall exposure. It is not significant, but we do have some concern in terms of delayed servicing of interest.
Q: Do you expect the stress in the real estate sector to worsen in the next two to three quarters?
A: I do not think so. Most of our exposures are on real estate pertaining to housing and we have seen a reasonable amount of demand getting met and there has been some slowdown. But, with the interest rate also stabilizing and slightly moving, we have seen the housing loan demand going up.
We do not see defaults happening in terms of projects essentially if it is confined to financing the housing loan segment. We do not have much of an exposure in terms of commercial real estate per se.
Q: Could you tell us what proportion of your real estate exposure is under stress? Is it just a marginal amount or majority of your real estate exposure is under stress? Is it just one or two developers or is it like a sector-wide story?
A: It is very marginal. Our real estate exposure is very, very insignificant against the overall exposure. A majority of it is under the housing loan segment and we have not seen the strains in that segment. I see very minimal effect in our books in terms of the strain in this segment.
HDIL stock price
On December 13, 2013, Housing Development and Infrastructure closed at Rs 48.20, down Rs 1.7, or 3.41 percent. The 52-week high of the share was Rs 123.95 and the 52-week low was Rs 26.10.
The latest book value of the company is Rs 243.00 per share. At current value, the price-to-book value of the company was 0.20.
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