Performance intact; need no PE investors: SE Investments

In an interview to CNBC-TV18 Sunil Agarwal, MD, SE Investments clarified that the fall in the stock price of the company could have been due the exclusion from MSCI index in the first week of November and not due to any performance related issue.According to him 16-17 FIIs who were holding the stock may have exited their investments due to this exclusion, which could have triggered the slide in the stock price. He thinks 6-7 lakh shares could have changed hands in the past few days.He reiterated that the company’s performance has been good so far; in fact for Q2 it posted 20 percent increase in PAT as compared to Q1.He also specified that the company was not looking at any PE investors for funds because the company’s networth is Rs 500 crore with a secured debt of only Rs 350-360 crore.Below is the transcript of Sunil Agarwal's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Latha: Is it promoter or private equity, some big investor selling off shares in your company that accounted for this one week fall?

A: Yes. In the first week of November our company was part of Morgan Stanley Capital International (MSCI) Index which has been replaced by other finance company having very high marketcap and extremely low profit after tax. There were about 16-17 investors which I understand foreign institutional investors (FIIs) who were holding the scrip because of the MSCI index inclusion and all of them who have acquired shares in the last couple of years have come on the counter to sell on the same day.If that kind of a thing happens that a small company like ours having a trading value of 40,000-50,000 shares on an average is going to have some wild swings. So there is absolutely no issue with the performance of the company. Our quarterly results for the first two quarters are already out. I personally feel, the company feels that the bottom out has already happened.In the quarter ending on September, we have posted about 20 percent increase in profit after tax (PAT) as compared to the quarter ended June. Actually we are in a bottom out kind of a situation. We are bottoming out. We have had a lesser profitability but there is a huge difference between lesser profitability and loss and even by vague margin we are not close to that kind of a thing. On 40 crore equity we are posting PAT of Rs 56 crore in March 2014.

Latha: I wanted to know if you have any idea of what was the total number of shares or percentage of your equity that had to change hands because of the MSCI exclusion.A: On a rough estimate it could be around six-seven lakh shares which have changed hands in the last couple of days. I am also noticing that the share price is going up today, so I personally feel that whatever was happening in the market should get over. Sonia: Can you give us an indication of how the second half of the year will shape up in terms of asset quality. Your gross non-performing assets (NPAs) are still at around 2 percent in the quarter gone by?A: That’s right. We have been following a policy of 100 percent write-off of our NPAs for the last 15 years. We write-off whatever is the NPA on the data of balance sheet. As far as I am seeing as on March we were at about 1.95 percent of our gross NPA percentage, currently it is about 2 percent. We have received some favourable arbitration awards in the last couple of weeks and if those awards we are able to recover money, I am looking at a gross NPA of 1.5 percent for the year ending March 2015. We are definitely improving our asset quality and there is going to be recovery from certain write-offs which have happened in the past which may add to direct profitability.