Auto ancillary company Amtek Auto has been hogging the limelight for all the wrong reasons in the past few days. The company's weak financials and alarming debt levels has made its lenders nervous over the threat of non-payment of dues. But Karur Vysya Bank, one of the company's many lenders, says the bank has very little exposure to the company.
"It will be lesser than Rs 100 crore. Maybe a double digit amount lent to them," says managing director and chief executive officer K Venkataraman.
About Rs 16,000 crore loans and bonds of Amtek Auto, that provides ancillary parts to Maruti Suzuki, are at stake. The company's rating has been downgraded to C in August, from A + on weak financial fundamentals.
Venkataraman further adds the bank is not a part of any strategic debt restructuring (SDR) as of now.
Below is the transcript of K Venkataraman’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Anuj: The first issue that we need to address is your exposure to Amtek Auto. If you could tell us the exact exposure and what kind of hit are we looking at for your bank now?
A: The exposure for us is very small. It will not have any significant impact on our balance sheet or profit and loss.
Anuj: If you could just quantify that, if you could give us a ballpark number?
A: Generally individual customer’s exposures it is little difficult for us to share with but as much I can say that it will not be any significant number. It is not a very high number. It is not in three digits are something of that sort.
Ekta: So it is in double digit then but can you just highlight for us whether you all would be writing it off in this quarter?
A: The company has not still come back with any offer or any alternative so far. The debt is yet to come. If the default is imminent and what kind of payment terms have to be given by the company we are not aware. Moreover it is actually a secured Non-Convertible Debentures (NCDs).
Anuj: What about business at large? Last quarter your credit growth slowed down quite a bit to single digits what has been the trend so far in this quarter and what is the outlook going forward?
A: This quarter there is a slight pickup but I won’t say that there is any significant credit pick up in the market as yet. The credit demand has not picked up because the demand per se is not picked up. The utilisation levels of limits of most of our customers remain very low. There are some indications; sporadically we have got some request for enhancements in limits and then anticipated increase in sales.
Hopefully we need to have a look at the third quarter; generally the season starts after October just before the Diwali time. As we see during this month when the requests are coming up one or two here and there I won’t still say that it is actually in a larger scale. May be busy season when it picks up there is a chance of a credit demand picking up provided the demand in general picks up in the economy.
Ekta: We have been getting lot of news flow with regards to strategic depth restructuring or SDRs which are being undertaken by banks. How feasible and option do you think it is from a lenders perspective for example to convert your debt into equity, one and two may be even find a strategic investor or someone to take over within 18 months your sense on the entire process?
A: The process per se is very good. There is an opportunity for taking away the asset that has created with the banker’s money and then given to somebody else who can run the company much better. This is a long felt need in the banking system. You asked a very valid question. How far are the banks prepared for this?
Point here is that in a stressed situation there are not many buyers for the property or the asset in spite of the fact that the capacity may be useful to them. At present when the demand is lower. People are not very keen to add capacity. In such a situation we need to hold this asset for sometime mothball it at least for some more time we need to have infrastructure for handling such situations.
I am sure going forward not of this kind of engineering companies and also some of the agencies may come in to the market who can hold these companies for sometime and then run them. Mothball it for the bankers and then handover to another management book and add to their capacity.
Ekta: Would you as a bank have exposure to any of the companies which have recently undertaken SDR and the list includes the likes of Monnet Ispat, ABG Shipyard. It might be eventually something which could be under consideration. Electrosteel Castings according to reports as well as the likes of Jyoti Structures anything on the anvil that you already have exposure to or could be on the anvil for Karur Vysya Bank.
A: At present we do not have any exposure which is going for SDR right now.
Ekta: The repayment date is due in September itself we understand?
A: Yes, September end if I remember correct; 20th or 22nd or something of that sort.
Ekta: You are in constant dialogue with the company I believe?
A: Yes, in fact all the banks are talking to them. There was Joint lender forum is also scheduled - how to go about this.
Anuj: What about the other group companies of Amtek Auto and the kind of bond exposure? Do you have any such exposure to either Castex Technologies or any other company from the Amtek Group?
A: Castex we don’t have any exposure. One or two group companies we do have exposure but not bond exposures. Some loan exposures are there in some of the companies.
Ekta: Would that also be in double digits or may be the quantum that if you could just qualify that for us?
A: That is also in double digit of course. It is a smaller exposure in other companies. They are doing okay. We are not seeing any kind of issue with them. There are no issues as far as those companies are concerned. They have got separate market anywhere.
Anuj: What about business at large? Last quarter your credit growth slowed down quite a bit to single digits what has been the trend so far in this quarter and what is the outlook going forward?
A: This quarter there is a slight pickup but I won’t say that there is any significant credit pick up in the market as yet. The credit demand has not picked up because the demand per se is not picked up. The utilisation levels of limits of most of our customers remain very low. There are some indications; sporadically we have got some request for enhancements in limits and then anticipated increase in sales.
Hopefully we need to have a look at the third quarter; generally the season starts after October just before the Diwali time. As we see during this month when the requests are coming up one or two here and there I won’t still say that it is actually in a larger scale. May be busy season when it picks up there is a chance of a credit demand picking up provided the demand in general picks up in the economy.
Ekta: We have been getting lot of news flow with regards to strategic depth restructuring or SDRs which are being undertaken by banks. How feasible and option do you think it is from a lenders perspective for example to convert your debt into equity, one and two may be even find a strategic investor or someone to take over within 18 months your sense on the entire process?
A: The process per se is very good. There is an opportunity for taking away the asset that has created with the banker’s money and then given to somebody else who can run the company much better. This is a long felt need in the banking system. You asked a very valid question. How far are the banks prepared for this?
Point here is that in a stressed situation there are not many buyers for the property or the asset in spite of the fact that the capacity may be useful to them. At present when the demand is lower. People are not very keen to add capacity. In such a situation we need to hold this asset for sometime mothball it at least for some more time we need to have infrastructure for handling such situations.
I am sure going forward not of this kind of engineering companies and also some of the agencies may come in to the market who can hold these companies for sometime and then run them. Mothball it for the bankers and then handover to another management book and add to their capacity.
Ekta: Would you as a bank have exposure to any of the companies which have recently undertaken SDR and the list includes the likes of Monnet Ispat, ABG Shipyard. It might be eventually something which could be under consideration. Electrosteel Castings according to reports as well as the likes of Jyoti Structures anything on the anvil that you already have exposure to or could be on the anvil for Karur Vysya Bank.
A: At present we do not have any exposure which is going for SDR right now.
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