KFA owners asked to infuse equity, sell non-core assets:SBI

A Krishna Kumar, managing director of State Bank of India says debt-ridden Kingfisher Airlines has been asked to infuse equity. 

Last week, the much-anticipated meeting between the management of the crippled Kingfisher Airlines with the consortium of 17 banks, which have a combined stressed exposure of over Rs 7,500 crore to airline, failed to make any headway.
The meeting, held at the State Bank of India headquarters, was attended by most of the lenders and the airlines' Chief Executive Officer Sanjay Aggarwal and Chief Financial Officer HG Raghunath.
As a first step, Kumar says, the lenders have asked the KFA management to do a proper valuation of the non core assets. "A time of about 15 days has been given to them (KFA). Post that, all options are open on the table. We are not ruling out anything but we are first looking at the valuations of these assets," he told CNBC-TV18 in an interview. Below is an edited transcript of Kumar's interview on CNBC-TV18. Also watch the attached video. Q: Where do things stand with regards to the Kingfisher lenders meet that happened last week? Has there been any headway in terms of how to go about clearing the liabilities?
A: The Kingfisher matter has already been made very clear at the end of the lenders meeting last week. Kingfisher has been told that they have to get in more money to continue the viability of the operations. So in the process, I think there is some discussion on the sale of the noncore assets. So that discussion is going on and after proper valuation, the next stage of that decision will be taken. Q: Will you wait for the management to come back with anything concrete because this has been lingering for many months now and the management has not made any great progress in either infusing equity or selling off none core assets to improve the balance sheet at all. Are you looking to do something like what ICICI bank did in terms of selling off assets to SREI Infra debt fund or will you wait to see any kind of improvement from the management for a few more weeks?
A: We have asked the management to do a proper valuation of the non-core assets and a time of about 15 days has been given to them for that. Post that all options are open on the table, we are not ruling out anything but we are first looking at the valuations of these assets. Q: That may be the key concern, is it your sense that any of these non-core assets are anywhere near the kind of liabilities Kingfisher has even to a bank like yours and any response from the management on what SBI themselves have been asking for which is greater equity infusion, greater equity participation from the Kingfisher management?
A: The Kingfisher management is looking for some relaxation in the FDI norms. But that’s not something which I could comment on. But yes, the valuation of these non core assets would obviously not cover the entire dues of the banking system but this is the first step. Q: With so much money owed to you, shouldn't banks be a little more forceful towards Kingfisher because it's not like they don't have any assets to sell. They have United Spirits, United Breweries, if the promoters sell some of its stake on those companies, they should be able to pay you back. Instead of looking at FDI in aviation, which is a policy matter, which none of you have any control over, shouldn't you be more assertive with so much money owed to you?
A: I cannot comment on that but the consortium of banks is definitely alive to all these issues and proper decisions will be taken as the weeks go on. Q: It is probably causing more pressure on your asset quality book as well. There seem to be concerns that the gross NPLs for the quarter may actually be higher than was estimated. Where do things stand at in terms of the NPLs both new and the gross NPL figure?
A: Obviously, there will be slippages in any ongoing operation. But regarding the levels of the NPAs, I am afraid I cannot see anything right now because the numbers are still being compiled and are under audit. Q: Is it likely that in the first quarter you would have seen more slippages may be even more than what you may have guided earlier to investors?
A: My take is there is nothing unusual about what will happen in the first quarter but I can't comment more on this. Q: There seems to be concerns about specific sectors though like textiles for instance where some of the pressure has increased, would you say that indeed has been the experience? Are new sectors like textile have begun to put pressure on the books?
A: I believe textiles were under pressure already towards the latter half of the last financial year. So there is nothing further on the textile front. But yes, there are a couple of other industries which we are keeping a closer watch on. Q: You did raise your deposit rates marginally to align it to some of the peer banks. In the environment that we are today, do you think it would be very unlikely unless you got a specific CRR kind of trigger from the RBI that rates in the system might ease off?
A: Yes, we have always been pitching for a cut in the CRR to help us transmit the reduction in the interest rates into the economy. But this rate increase in the deposits which we did recently was just a marginal adjustment in a particular time bucket. So nothing should be read into it. Q: In that same conversation about a deposit rate increase the chairman of the bank did mention that he was more concerned about credit growth now and that there could be slippage on that front. Are you beginning to temper expectations on core credit growth itself?
A: Yes, till the middle of June, we did have a lot of concern on the lack of credit growth but towards the latter half of June, there have been some visible signs of credit improving. But we need to still focus a little more on the increase in credit growth. Q: Do you think you'll manage 15% or the number might be even south of that for the full year FY13?
A: For the full year, we are very hopeful that we will achieve our internal expectation of at least around 20-25% but then a lot depends on what happens in the next couple of months with the monsoon. Q: There hasn't really been any pass through between what the RBI has chosen to do on rates and then what banks have gone ahead to do but any expectations from the end of this month in terms of whether or not the RBI will move on cuts?
A: My personal expectation would be that there should be some lit up in the policy rates, there should be some decline but then RBI is the best judge of this.