Maintaining healthy portfolio priority now: SREI Infra Fin

Excerpts from Markets and Macros on CNBC-TV18 Watch the full show »

Meanwhile, the company is now focusing on maintaining quality of its assets and is ready to compromise on interest margin to build good portfolio. “Interest rates or profitability becomes secondary now because the markets are going through a very strenuous situation, so the portfolio should not get affected,” he elaborated.

Below is the edited transcript of Kanoria’s interview with CNBC-TV18. Also watch the accompanying video.

Q: Just give us a sense in terms of what exactly did you make of the RBIs policy stance and whether you also share the opinion that now it’s the governments turn to act with regards to actually push the economy?

A: I was not expecting any announcement from RBI at this particular juncture. For the last about a year or so I am of a strong opinion that RBI can do very little to trigger off the growth. It is the government which has to get their act in place. There are a lot of things which the government has to do on streamlining the processes.

After this particular budget what has happened is a loss of confidence of the investors because of the confusion in tax which has been created and a lot of arbitrary in it which will now stem out on the tax front, which scares the investors away.

So I don’t think that is what is appropriate of the government at this juncture to do. I think that a lot of action has to be taken from the governments’ perspective than RBI. RBI has done a good job of whatever they can do in their limited role which they have in the economy.

Q: You are looking to raise ECBs, how has the situation changed for you? Would you rethink this USD 50-100 million ECB and prefer to go local?

A: We have to raise resources both locally and in the global market too. The ECBs liquidity in international market has been a little tight because of lack of clarity in Europe and interest rates are also not very low overseas at this particular juncture. So, we are in the international market and wherever we see that there is an opportunity to raise money we will do it.

The way the rupee has been depreciating it has not been very good for us or any Indian company. We have taken M to M losses in the last quarter also, this quarter also we’ll have some mark-to-market losses. So, there is a lot of uncertainty. It is not that we don’t need to raise through ECBs, but till things stabilize a little bit we’ll go a little slow on raising ECBs at this juncture.

Q: How will spreads pan out for you? What is likely to be your cost of money in the current quarter and year if you can and what are likely to be the interest rates that you will make?

A: For the entire financial sector especially in India and globally, it is more important to concentrate on the quality of assets at this particular juncture. They have to see that assets do not come under any strain. Interest rates or profitability becomes secondary now because the markets are going through a very strenuous situation, so the portfolio should not get affected. 

In India, if you see in infrastructure whether it be roads, power, ports, everything is going a little slow. Policy guidelines are not clear in many of the areas especially in the power sector and telecom. So, we are trying to focus more on is on the quality of assets. As far as the interest margins are concerned, if we have to compromise on interest margins we are ready to do that to maintain a healthy quality portfolio.

Q: Give us a sense in terms of how exactly the NPA situation is panning out for both the equipment finance as well as the project finance business?

A: Our NPAs fortunately has been very low. In the last 15-16 years I think that we would have only one of the accounts which has got affected. We have superior quality of credit assessment where we have been able to maiintain very low NPAs.

Now also there is nothing concerning because we have reviewed our portfolio in this particular quarter. We don’t see any signs of any stress with the clients. There may be some delays here and there.

Q: If we can work with some numbers both on the issue of spreads or margins as well as on NPLs. When you say low what is the likely gross NPLs that you are looking at?

A: On the equipment finance, we were having about 1-1.25%, so we should be maintaining that only. There we don’t see anything going up high and that also because we have very stringent provisioning norms. On that particular basis we have these kind of numbers. If we follow generally what all the other banks and institutions do then our NPAs will be much lower.

In the project finance side we adjusted about 10-15 bps on the NPAs so there is nothing to get worried about. Out NIMs have come down because the interest cost with M to M provisioning which has been there has resulted in higher cost of funds. So, the NIMs will be lower both in the equipment financing and the project financing business for this particular year if the same kind of interest rates and variations in foreign exchange continues.

Q: We understand that Quippo is bidding for a tower business in Bangladesh. Just give us a sense in terms of what the details are with regards to that and when we could hear something concrete?

A: Unfortunately, I will not be able to give you much detail because we don’t know about it. It was just a conjecture which came out in one of the newspaper. We are also trying to find out that whether there is actually a deal going on. We have discussed with our management and there is nothing at this juncture. It is very difficult to take a call on something which is just baseless.