We are not seeking any fresh funds: Capital First

In an interview to CNBC-TV18, V Vaidyanathan, chief managing director, Capital First (earlier known as Future Capital) denies any report that claims the company is seeking funds. "Yes, as any management, we need growth capital. We are a growing company and over a period of time. We will need capital. However, this particular report that says that there is a deadline by April of 2013 and that we want to conclude another private equity transaction is actually incorrect," he adds.

Below is the edited transcript of Vaidyanathan's interview.

Q: There is a buzz that there will be more private equity buy-in into your stock. Can you give us some clarity on that?

A: I have read this report and it is my responsibility to clarify that at this point of time, there is no real option or opportunity that we are seeking on this front. Yes, as any management, we need growth capital. We are a growing company and over a period of time, we will need capital. However, this particular report that says that there is a deadline by April of 2013 and that we want to conclude another private equity transaction is actually incorrect.

Q: What is the growth capital you need? Could you provide us a number of how much the company is seeking atleast in the near-term? Any kind of a time-line, if not the exact USD 30 million which is reported in the papers?

A: At this point of time, the company’s capital adequacy is 22.7 percent. It is quite large enough for us to sustain for a long period of time, maybe a couple of years. However, tthe company’s growth plans are also equally ambitious. We have assets that we are managing of over Rs 6,500 crore and we expect this to grow by about 35 percent compounded over next two years. So certainly, along the way, maybe over a year or two, we might need capital, but there is no immediate plan as the article seems to suggest, no.

Q: What explained the fall in profit in the second quarter?

A: Basically we are investing in new lines of businesses which we started five or six months ago. It includes the two-wheeler loans, consumer durable loans and gold loans as well. These are businesses where we are investing at this point of time and we are very confident that these will pay off handsomely over a longer period of time. There is another significant factor. Earlier we used to account lending businesses, fee income and even income in the securitised portfolios upfront.  From this year on, we are amortizing it over the life of the loan. So as investors I should guide everyone that over the next two quarters one will actually see the profit numbers for the company come down and it will climb back after sometime.

Q: You were telling us that you expect a u-turn in profit and revenue. Which quarter can we expect that climb?
  
A: It is not a u-turn actually. We had booked close to about Rs 90 crore of income as part of wholesale banking fees and securitisation income last year. What we are doing from this year onwards is, we are amortizing it over the life of the loan. So investors will for a period of time, let me say two quarters, see a temporary dip in profit numbers, though I must mention that the economic profit still remains the same,. The company used to grow well. It is the accounting number that you will see a temporary dip. It is a good practice. I think over a period of time, maybe three or four quarters, the profit numbers should normalise again. As far as the company is concerned, I must say the company is doing very, very well in terms of both growth on the top-line as well as income.

Q: I believe Future Capital held pledge shares of Deccan Chronicle. Could you tell us what has been the financial impact of that? We have seen the stock completely collapsed. Have you all had to write it down? You have released a few of the pledged shares, what happened?

A: Close to about four months ago when this matter had come up we had informed the exchanges and the public at large, that this account has been assigned by the company. Therefore there is no exposure whatsoever on Deccan Chronicle on the Future Capital books.

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