Rate hike not to impact borrowing cost: Tourism Fin Corp

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Rate hike not to impact borrowing cost: Tourism Fin Corp

In an interview with CNBC-TV18, Archana Capoor, Chairperson & MD, Tourism Finance Corporation gave her perspective on disbursements to the infrastructure sector.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS CNBC-TV18 Poll: Lending rates to go up in Q3 FY11 What's next for interest rates after RBI rate hike? RBI seen lifting rates at modest pace: DBS Don't see borrowing cost go beyond 9.5% in 2010: HCC RBI raises repo, reverse repo: What will happen on July 27? ALSO READ See latest News about Tourism Finance See previous management interviews See what other Experts & Brokerages are saying about Tourism Finance Tourism Finance BSE | NSE 28/05/12 Are Mutual Funds betting on Tourism Finance?

Q: Could you give us some numbers in terms of what was the cost of money and the money you were making by lending, what was your spread and how do you see it for the second half?

A: As far as sanctions go, last year we had sanctioned more than Rs 500 crore and this year we are targeting more than Rs 800 crore. So we are talking about a 50% increase in the sanctions and linked to sanctions is disbursements. Last year we had done almost Rs 250 crore in disbursement. This year we are targeting almost Rs 400 crore. It is a very ambitious line because this is the first year of sanctions of infrastructure sector and we have a build up of Rs 100 crore in the very first year.

As far as cost of fund goes last year it was hovering around 9-9.25%, for institutions this is an acceptable limit because we do not have cheap source of fund like banks or we do not have dedicated lines as far as established players in the institutions like agriculture sector lenders or small scale lenders are there. Our spreads have been hovering around 3%. So in some cases the spreads have improved quarter wise.

So this year we would be targeting a lower cost of funds, much lower than this because even a spread of 2%, I need to work out. A business of Rs 400 crore would fetch me a very small amount of income. So the main thing our emphasis would be reducing our cost, increasing the balance sheet size and since my NPAs have improved drastically, our net NPAs have come down to below 3% and targeting almost 99% of recovery.

Q: What would this means in terms of your net interest margins (NIMs)? You ended last year at 3.5% what is the range that you are expecting this year?

A: This year around 4-4.5%, not over 4% that would be too ambitious because we are going to enter a new sector where we have to lend at much lower rates as compared to hospitality. There is tough competition in that area. So we would be looking at even if I get the spreads around 3-3.5% it would be decent for us.

Q: You wrote back Rs 1 crore in terms of money recovered on loans that you had already written off; will there be recoveries in FY11 as well?

A: Yes there would be. There are a few cases which are already in advanced stages of settlement through the court. So we would be auctioning those properties and we would be definitely writing back some of it.

Q: So you would make a crore?

A: That I cannot say as it all depends on how the legal and the auction system goes.