Textile cos in better shape, see no slippages: Karur Vysya

After a brokerage report pointed out that outlook for textile companies are improving that will help banks exposed to the sector, K Venkataram, managing director and chief executive officer, Karur Vysya Bank reiterated his positive outlook.

Also read: Videocon rises 5% on banking foray, stake sale in gas field

Not only does Venkataram expects an absence of slippages from the textile companies, he also foresees stable cotton pricing and rupee depreciation increasing profitability for cotton exporters.

Below is the edited transcript of Venkataraman’s interview to CNCB-TV18.

Q: There was a report which came out from one of the brokerages which said that textiles, so far, has been a stress area. But in the coming year with stable cotton prices, most of these textile companies have not undertaken capex in the last few years. In general, the outlook for textile companies is improving and therefore banks like Karur Vysya Bank are likely to see lower accretion to their non performing assets (NPA) due to the textile sector. Could you tell us what your exposure stands at and is that a trend that you have seen some improvement in the textile space which should help your asset quality?

A: We didn’t face that much of a stress in the past in the textile sector in our bank. There were a few accounts which had difficulties. Otherwise, in general, our portfolio has been pretty stable. The accounts which have faced a little bit of stress have already come out. Going forward, we find that the retail sector has better opportunities.

Q: Why are you saying that? Is that because of the monsoon? Is it because of the rupee depreciation giving them larger export markets? What gives you the sense that it will be better? Do you think that other banks which have stressed textile assets would now see some relief?

A: It’s a host of other factors. Exporters do have good opportunity now because of the rupee depreciation. In general, the cotton prices have been stable and most of these people have already started thinking about expanding again. So, we find that the demand as perceived by the manufacturer particularly the skinners and the fabric manufacturers seem good opportunity in terms of export, in terms of even domestic demand.

Q: Any bad textile assets are likely to turn into standard assets in FY14 for Karur Vysya Bank?

A: We have a couple of accounts which are in the NPA category but they may take a little longer because they are restructured level. They have a good opportunity this year if they can make up all the arrears. They may, but I am not very sure about that. The other textile companies which have been under little bit of a stress, though they have not been under NPA or anything of that sort, these are likely to face much better profitability this year.

Q: Generally, are you feeling that the fresh slippages for the current quarter and next would be less? You will have some handle on this quarter’s slippages. How much might they be?

A: In textile sector, we do not find any difficulty at all. And overall slippages will be almost similar like the past couple of quarters. We find that this has been abating. The kind of problems or the stress levels that the companies have been facing is abating a little now. Maybe it will take a quarter or two to stabilise.

Q: Last quarter, fresh non performing liabilities were Rs 96 crore. What might we expect in the current quarter?

A: It maybe almost same or slightly lesser.

Q: You also have a gold loan exposure. Could you tell us if your loan to value (LTV) and few of your accounts have been above 90 percent which have gotten hit because of this sharp fall in gold prices?

A: The LTV on gold loans are always around 70 percent for us or slightly less. But it has never been anything above 70 percent. Even with 20 percent depreciation, gold prices with the accrued interest has not faced any problems. We do not see any issue as far as the gold loan portfolio is concerned.

Q: Those who have taken gold loans are returning the money?

A: Yes, very much.