Indian Overseas Bank chairman M Narendra says, in an interview on CNBC-TV18, that the bank will lend more to the TNEB after the process of restructuring.
The Tamil Nadu government has, along with a few other states, taken the initiative to increase tariff rates
Indian Overseas Bank
Indian Overseas Bank chairman M Narendra says that the Tamil Nadu government's promise to take over 50 percent of the short-term loans issued to the TNEB and implement restructuring of loans has significantly reduced the bank's liability and exposure.
In an interview to CNBC-TV18, the bank’s chairman adds that this will allow the government to issue bonds that will lure further investment into the state. Narendra expects to increase lending to TNEB after restructuring and estimates Q4 earnings to be better than Q3.
Below is the edited transcript of the interview on CNBC-TV18
Q: Is your exposure at Rs 1,000 crore?
A: It is at Rs 1,100 crore.
Q: Will the situation start to improve on the state government taking over 50 percent of the short-term loans of Rs 12,200 crore? Will you lend more to the electricity board?
A: As per the package proposed by the power ministry and duly approved by the ministry of finance, the TN government was the first to increase the tariff and has recently opted for this restructuring of loans. The State Bank of India (SBI) is conducting the process of restructuring.
Q: What about the rest of the long-term loans of Rs 30,000 crore?
A: Out of the overall exposure, if half of the short-term loans are taken over by the government, the balance will remain as a long-term loans according to the package. These will be taken by the banks and incrementally they will have to give government guarantee for their working capital. So, it will in a way reduce our liability.
Q: So will your liability of Rs 1,100 crore become Rs 550 crore?
A: Yes, the liability will be reduced. The government has the opportunity to issue non-statutory liquidity ratio (SLR) bonds, or offer it to the market, mutual funds and other long-term investors.
Q: The TN government was one of the first few states to implement a huge increase in tariff last year. Has the government indicated by how much it will increase the tariff in FY14?
A: The Tamil Nadu government has, along with a few other states, taken the initiative to increase tariff rates. The state government has also increased the tariff of the local transport. This is according to Vision 2023 - a long-term plan to create a lot of infrastructure in the state.
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IOB stock price
On August 20, 2014, Indian Overseas Bank closed at Rs 64.00, down Rs 1.85, or 2.81 percent. The 52-week high of the share was Rs 89.90 and the 52-week low was Rs 37.20.
The company's trailing 12-month (TTM) EPS was at Rs 6.05 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 10.58. The latest book value of the company is Rs 130.90 per share. At current value, the price-to-book value of the company is 0.49.
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