Aim to reduce NPAs to 8% in FY14: IFCI

Anurag Jain, Interim CEO & Joint Secretary of Finance Ministry, IFCI, says the company is taking corrective actions to improve asset quality and aims to bring its net NPA down to 8 percent in FY14.

Speaking to CNBC-TV18, he says out of the 22 percent gross NPA, almost about 12 percent is legacy NPAs and among the recent assets that have turned NPAs, some are related to the general stress in the economy. But, adds that most of the projects are backed by good securities.

The company has also planed for about Rs 5,000 crore disbursements in 2013-14 so base effect will also come in. Futher, he says getting the banking licence would add value to the company. But if not, their future is not at stake. "IFCI has expertise in various fields and its net worth is Rs 5,800 crore and has a balance sheet size of Rs 25,000 crore," says Jain. The company has even selected a new CEO and revamped the board.

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Below is the verbatim transcript of Anurag Jain's interview on CNBC-TV18

Q: Is IFCI's future terribly tied to getting a bank licence because it was one of those development finance institutions which did not get merged with a bank unlike IDBI and ICICI Bank. How would IFCI work itself out if the banking licence didn’t come for it?

A: Actually I would agree that the banking licence would add value to IFCI, but in any case it is not end of the world. As such we have plans to put IFCI back on track. IFCI has a history of 75 years, it has expertise in various fields and its net worth is Rs 5,800 crore and has a balance sheet size of Rs 25,000 crore. We have actually selected a new CEO and board has been revamped, few more professionals will be inducted and IFCI will have a great future.

Q: The financials of the company have been quite poor in the last many quarters now. How long do you think it would take for the financials to stabilize and issues like asset quality deterioration to improve etc?

A: We have already started taking corrective actions. We know that the NPAs were very high when the year closed in March 2013. We have started taking corrective actions, and have started to look at each and every portfolio. One good thing is that prima facie, it is not that bad because out of the 22 percent gross NPA, almost about 12 percent is legacy NPA which were in 1990’s and early 2000 before the government bailed it out by giving an assistance of about Rs 3,500 crore. So those things are also being carried on the book, if there is some recovery against that we are making efforts so that will add directly to the profit because it is all provided for.

The recent assets which have actually turned NPA, some of them are related to the general stress in the economy. Most of the projects are backed by good securities and we should be able to bring them out of the NPA because the government has already started taking corrective actions on putting the stalled projects on fast track.

Q: What do you think of the progression of NPAs in the next two-three quarters? Considering the stress in the economy is not yet over, we continue to see stress either through rupee depreciation or perhaps through higher administered prices of certain products say diesel and eventually gas. So small and big industries continue to be under some kind of stress. What is your estimate of the NPA progression for IFCI itself? Does that 10 percent come down to 9-8 percent in FY14?

A: In FY14, it will come down to about 8 percent net NPA that is what we have planed. Two things will happen, one, we have started taking action to resolve existing assets that are stretched. Some of the assets people have actually come back and told us how they are going to repay. We have sort of restructured some and if the repayment continues to come, the asset will go from NPA to standard classification.

On the other hand, we also need to increase the base. Actually in 2011-12 and 2012-13, the disbursements were also low. As a result in 2012-13, the balance sheet size actually came down by about Rs 2,500 crore. So we have charted out a plan to increase disbursements, we have planed for about Rs 5,000 crore disbursements into 2013-14 so base effect will also come in. So as a result, the net NPA will come down to about 8 percent that is what we envisage.

Q: How many branches do you have?

A: We have about 28 branches.

Q: Finance ministry officials have come on record saying that the government wants the performance of IFCI to improve before it decides to divest stake in the company. Can you give us any clarity on whether there is any kind of stake sale that the government has planned within this calendar year itself, given the fact that the performance of the company might improve like you suggest?

A: I won't comment on the divestment plan because the decision on the same will be taken at an appropriate time. The government has examined various options, which are under consideration and as and when the final decision gets taken the world will know. We are looking, if the performance improves, if the company has to continue as such or the company has to be divested, improvement of company will help.