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BK Batra, Deputy MD, IDBI Bank in an interview to CNBC-TV18, said they welcome the UltraTech and JP Associates deal because post deal he expects the debt level of JP Associates to get moderated.
IDBI Bank has always been a leader in financing infrastructure projects and we do have significant exposure. Today our exposure is a little over 20 percent of the total book.
The deal is a step in right direction because it reduces the debt servicing burden of the group.
Moreover, he confirmed that the bank has significant exposure to infrastructure projects. "Our exposure is a little over 20 percent of the total book and it is more or line with exposure of banking sector to infrastructure sector,” he added.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: Since IDBI Bank has one of the largest exposures to Jaiprakash Associates accumulative debt can you tell us whether there would be debt transfer of IDBI Bank to UltraTech and how much exposure do you have?
A: I cannot share the exposure details of an individual client but this is a welcome deal. From the details of transaction which are available in the public domain so far, it is slated to benefit both the parties and therefore we welcome this transaction.
Q: In general so many banks have exposure to JP Associates which is a highly leveraged company now that the debt has been transferred to a relatively credible and a low leveraged company do you think there will be a greater sense of comfort between banks and perhaps there could be a process where debt repayment is made?
A: The deal is a good development from the view point that the debt level of JP Group which apparently looks somewhat high would get moderated to the extent of debt which is exists in this unit.
Any group or company, which is highly leveraged makes efforts to reduce that leverage then bankers would surely welcome that. It reduces the debt servicing burden of that group and the company.
At the same time it makes some liquidity available to this company. So from that viewpoint obviously if debt burden of the group is going down, we would feel that it is step in the right direction.
Q: What is your accumulative exposure to power and infrastructure as a bank right now? Is there any incremental credit that you would be sanctioning to those sectors?
A: IDBI Bank has always been a leader in financing infrastructure projects and we do have significant exposure. Today our exposure is a little over 20 percent of the total book and it is more or line with exposure of banking sector to infrastructure sector.
We won’t be able to say that we are not taking any additional exposure at this moment. Any viable proposals are always welcome. However, at the moment the pipeline for fresh infra projects is as good as dry. There are several projects under implementation and they are the ones which need support on priority basis.
We are trying to do our best for those projects under implementation and that need hand handling and support of various kinds.
Q: Do you see worsening of asset quality going ahead? Our interactions with industry and analysts make us believe that perhaps worst is not over in terms of asset quality and IDBI Bank has had a problem with that how do you see the trajectory pan out?
A: Stress is definitely there in infrastructure sector and in certain other project financing cases as well. The process of addressing that stress has been on for quite some time and much of that stress has been addressed. One is not in a position to say that the exercise is over; it is still on particularly in some of the infrastructure companies.
However, bankers are taking steps together to address that kind of stress as well. During the next couple of quarters my guess is that it should get largely addressed.
IDBI Bank stock price
On March 30, 2015, IDBI Bank closed at Rs 71.75, up Rs 1.75, or 2.50 percent. The 52-week high of the share was Rs 116.50 and the 52-week low was Rs 58.55.
The company's trailing 12-month (TTM) EPS was at Rs 5.26 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 13.64. The latest book value of the company is Rs 147.38 per share. At current value, the price-to-book value of the company is 0.49.
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