In an interview to CNBC-TV18, RK Goyal, ED of Central Bank of India spoke about Winsome Diamonds account. Central Bank of India has classified both the accounts of Winsome Diamonds as non-performing assets (NPAs).
Chances of CDR going through are very bleak so in that case based on the forensic audit report and if one does not get satisfactory reply from the borrower we will declare this account as fraud.
Central Bank of India
Both accounts of Winsome Diamonds - Winsome Diamonds and Forever Precious Jewellery and Diamond are already classified as non-performing asset as on June 30, 2013, says RK Goyal, ED, Central Bank of India . The bank has been trying to restructure the account for the past three months, but the chances of it actually happening looks bleak, he says.
For CDR to go through, Central Bank had asked for the fulfillment of three conditions. The promoter was asked to bring in Rs 250 crore upfront, being certain percentage of the diminishing in NPV value, which he hasn't managed to so far, Goyal told CNBC-TV18. Second, the promoter was asked to come on board of both the companies and third the promoter has to respond to some observations which were a part of a forensic audit that was carried out some time back, he adds. If these conditions are not met, this account will be declared as fraud and Central Bank will make 100 percent provision in the September 2013 quarter itself, says Goyal.
According to him, in case Central Bank restructures the Winsome Diamonds accounts, the bank will have to make another 10 percent additional provision which will be around Rs 95 crore and if the restructuring does not happen and the bank is unable to prove that the promoter committed fraud with the banking sector then 100 percent provision, which means the difference provision of around Rs 800 crore, will be made in this quarter itself.
Below is the verbatim transcript of RK Goyal's interview on CNBC-TV18
Q: What is the latest on Winsome Diamonds what is your overall exposure to the company and would you be classifying this as a non-performing asset (NPA) now?
A: Winsome Diamonds there are two accounts of this group. One is Winsome Diamonds only and the other is Forever Precious Jewellery and Diamond. Both these accounts are already classified as NPA as on June 30, 2013. The question was restructuring of the account which we are trying for last three months. There are certain issues. The major issue is the promoter has to bring in Rs 250 crore as upfront being certain percentage of the diminishing in NPV value which he is not able to bring so far that is one thing.
Second, we had stipulated of the conditions that he has to come on board in both the companies which he is not interested.
Third and the most important we had carried out forensic audit and there are certain observations in forensic audit which he has to reply and he has not been able to reply satisfactorily so far. Because of these three reasons we could not go ahead with CDR proposal but we are still trying PNB is working on it. Punjab National Bank is the led bank of the consortium.
As of today if one ask me very honestly, chances of CDR going through are very bleak so in that case based on the forensic audit report which we already have on record and if one does not get satisfactory reply from the borrower we will declare this account as fraud. We will take all necessary steps to declare the account as fraud and we will make 100 percent provision in this September 2013 quarter itself.
We are very clear that account is already as NPA as of June 30, if he does not give satisfactory reply before we close our books for September 30, we will declare it as a fraud and then we will go for recovery.
Q: So far have you made any provision at all with respect to Winsome Diamonds account and just to clarify you have not written it off as of now?
A: Yes we have already made provision of 15 percent in this account as of June 30, 2013, and in case we are able to go for CDR we will have to make another 10 percent additional provision which will be around Rs 95 crore and in case we do not go for CDR and we are inefficient to prove that he has committed fraud with the banking sector then we will make provision of 100 percent that means the difference provision of around Rs 800 crore will be made in this quarter only.
Q: Could you tell us what came out in the forensic order, any more detail you could throw light on? What did the report show?
A: The allegations are not very serious. If he gives all the documents I think we can go ahead with CDR. The allegations mainly are that whatever exports he has made in certain cases he does not have the proof of delivery of goods abroad that is one.
Second, in few of the cases he has sold the gold in the domestic market only. Third, he has exported the entire lot of the jewellery during the last one year to one particular group in Dubai which created certain suspicion as to why he would take a huge exposure on one buyer only.
Similarly, there are few other things which in case he has not done anything wrong he can submit the proof and prove that he has not committed the fraud. But so far he has not given any satisfactory evidence to prove that he has not committed the fraud. We are still waiting that he will do something positive in the next 10-15 days, otherwise when we will close our books which will be sometime near October 31, we will declare the company as fraud.
Winsome Diamond stock price
On November 27, 2015, Winsome Diamonds and Jewellery closed at Rs 0.66, down Rs 0.01, or 1.49 percent. The 52-week high of the share was Rs 1.52 and the 52-week low was Rs 0.28.
The company's trailing 12-month (TTM) EPS was at Rs 24.62 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 0.03. The latest book value of the company is Rs 53.96 per share. At current value, the price-to-book value of the company is 0.01.
READ MORE ON RK Goyal, Central Bank of India, Winsome Diamonds, NPAs, Forever Precious Jewellery and Diamond, restructure
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