In an interview with CNBC-TV18, Satpal Arora, MD of Tourism Finance Corporation of India (TFCI), talked about the state of business and the outlook ahead.
The TFCI counter has seen Insync Capital Partners pick up 4.25 lakh shares at Rs 56.2 per share. Noted investor Rakesh Jhunjhunwala is one of the designated partners of the fund.
Below is the verbatim transcript of Satpal Arora’s interview to Latha Venkatesh and Reema Tendulkar on CNBC-TV18.
Reema: Could you give us a sense of what the future growth of the company is going to look like? For the last three years we understand that the company sales growth was up just about 1 percent while the profits in fact contracted by 1 percent which basically means no growth in the last three years. Could you tell us how the next three years are shaping up for you?
A: I think the growth should come now. We are looking for 20 percent growth in our balance sheet. This year we have a target of Rs 1,000 crore and we are on track for expanding the balance sheet.
Latha: What do you expect by way of net interest margins and default loans, how will that scenario pan out in the second quarter?
A: So far we are maintaining our margin but default, there are slow recoveries.
Latha: What might your default rate look like?
A: It was about 10 percent last quarter. It should be more or less same; I have not closed my book so far.
Latha: 10 percent is fairly high as an NPA rate; would you see it coming down in the second half or in one year’s time?
A: Tourism is a capital-intensive industry so we have given finance to almost all the big hotels. So, our assets are secured, they are paying interest but principle repayment is little delayed. So, because of delay in payment of principle amount there is a NPA problem.
Reema: You guided for a balance sheet growth of 20 percent this year as well as Rs 1,000 crore asset under management (AUM). How much of that have you managed in the first half of the year, are you on track?
A: We are on track. We had our budget for Rs 1,000 crore for the year; for the half year budget I think we are on track.
Latha: How much are you benefitting from the falling yields, has your cost of money fallen?
A: No, because we have raised our bonds earlier which are fixed cost bonds.
Latha: How much did they cost you, 10 percent, 9 percent?
A: Our average cost is about 9-9.25 percent.
Reema: Apart from your balance sheet as well as the disbursement growth, what about the actual revenue growth because even in the past you have enjoyed a good disbursement growth but it is not reflecting in your revenue as well as profit growth. Could you give us some estimates of that for FY17 and FY18?
A: Last year because of some technical reasons we had to declare about four accounts as NPA, so, our revenue growth was low. This year our revenue growth should be, besides recovery from NPA and expansion in the balance sheet, maybe 10-15 percent rise in the revenue should be there.
Latha: Recovery from NPAs, how much are you expecting?
A: I told you we are recovering interest; principle repayment is little problem for which we have to reschedule the principle amount which will not convert the NPA into performing because it will remain an NPA for one more year.
Latha: You are getting into some kind of infrastructure projects as well, which ones and why?
A: We are comfortable in the tourism industry.
Latha: So you are not getting into infrastructure?
A: We are not much interested there.
Latha: What is the kind of loan growth did you say you will manage?
A: We had a balance sheet of Rs 1,600 crore last year. I think we should grow by about 20 percent, so, 1,800-1,900 probably will be the balance sheet by the year end.