SREI Infrastructure Finance is not worried Rs 430-crore loan exposure to Kingfisher Airlines as the security value (value of assets attached with the loan) of the loan has grown in value.
SREI Infrastructure Finance is not worried about the Rs 430-crore loan exposure to Kingfisher Airlines as the security of the loan has grown in value, Hemant Kanoria, Chairman and Managing Director, SREI Infrastructure Finance told CNBC-TV18 today.
"The value has appreciated quite a lot. So, therefore we are well-secured at this particular juncture. So, there is no concern for us," Kanoria said.
The non-banking financing company had last year acquired Kingfisher Airlines loans worth Rs 430 crore from ICICI Bank. Many in industry had believed that it was foolish move on the company’s part.
In another development, SREI Infrastructure Finance plans to soon raise Rs 150 crore via launch of non-convertible debentures. The proceeds from this issue will be utilised by the company in various financing activities.
Despite the current high interest environment, the company is hopeful of maintaining margins in the next quarter.
"We have not been going out in the market borrowing too much in March expecting this. I don’t see that there will be too much of pressure on the margins in this particular quarter. We should be in a position to maintain the margins as it was in the last quarter, if not improved further," Kanoria said.
Q: What is the latest on the loans you hold from Kingfisher? Have you sold the shares? What is the agreement you have reached with Diageo, if you can just update us on the latest?
A: Securities and Exchange Board of India (Sebi) has given the approval, so we written to the Kingfisher Airline management. Now they have to decide whether they would sell the shares or liquidate the loan, or the steps that they will be taking. We still have some time before the loan gets due. So, the Kingfisher management has the time to think about it and come back to us with a plan which they have in mind.
Q: It would mean that you would give your shares in the open offer?
A: No, we don’t have to do that now, because there are certain clauses in the agreement where we need to discuss with the management. If the management is paying back or if Diageo takes it, then we don’t have to offer it in the public. It is well-protected and the management definitely knows the value of the security that we have and whatever they think is appropriate for them and in the best interest of United Spirits Ltd (USL) and the company. So, we will go according to that because we are well-secured.
Q: Your loan is Rs 430 crore. How much is your asset, your collateral?
A: The value has appreciated quite a lot. So, therefore we are well-secured at this particular juncture. So, there is no concern for us.
Q: What is the next step? When do you actually get the money back?
A: As I said that there is still time to go because it was a one-year loan, which we had given last year in July. So, we still have time. It will all depend upon the management. We have already told the management. The management will come out with their plan and as I said that there is nothing for us to get worried or hurry in this matter.
Q: You all are raising some non-convertible debentures (NCDs) tell us about what will be the cost of funds for this quarter and how are you expecting margins to pan out?
A: In this particular quarter we will be soon launching about Rs 150 crore worth of NCD. It is a small amount, with which we are testing the market. The interest rates have come down a bit but not substantially. It is just about 25 basis point (bps) drop from the last quarter.
Going forward we have to see what indications Reserve Bank of India (RBI) gives. If they cut the repo rate then only we will see an interest rate decline. Otherwise, it is going to remain stable at this particular point. So, we don’t see much of improvement on the margin as such. It will remain as it was in the previous quarter.
Overall from the business perspective the sentiments are much better. In general the Budget has sent positive sentiments. The government wants things to start rolling out and it is on track.
So from that perspective it is going on fine. Nevertheless the areas where the government needs to still look at on are the environment issues, land, power, coal situation; these remain unaddressed. I am sure that in the next one or two months the government would now look at and address these issues. Because as we see in the Index of Industrial Production (IIP) figures, infrastructure has not picked up and sales are lower in the capital goods, earth moving equipments and construction equipments. So therefore, I think that the infrastructure sector still needs to pick up.
Q: On the short-term borrowing cost there is a lot of liquidity tightness, the yield curve is inverted right now. How has that impacted your borrowing cost in anyway in this quarter and in that could we see some pressure as compared to Q3?
A: No, I don't think so that there is a much of pressure as such, because we had basically structured our borrowing programme. It is always expected that in the month of March there is always pressure on liquidity. So, we have not been going out in the market borrowing too much in March expecting this. So, I don’t see that there will be too much of pressure on the margins in this particular quarter. We should be in a position to maintain the margins as it was in the last quarter, if not improved further.
SREI Infra stock price
On December 19, 2014, SREI Infrastructure Finance closed at Rs 47.35, down Rs 0.8, or 1.66 percent. The 52-week high of the share was Rs 57.55 and the 52-week low was Rs 19.35.
The company's trailing 12-month (TTM) EPS was at Rs 1.70 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 27.85. The latest book value of the company is Rs 53.22 per share. At current value, the price-to-book value of the company is 0.89.
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