Anil Ambani has scripted a rescue operation for his telecom business. There is a huge debt resolution plan that is afoot and that will perhaps remove about Rs 39,000 crore out of Rs 45,000 crore of debt that the company now bears.
In an interview to CNBC-TV18, Pawan Kumar Bajaj, MD of United Bank of India and Ravi Krishan Takkar, MD & CEO of UCO Bank discussed about what is in it for bankers.
Bajaj said once the company (Reliance Communications) will be out of strategic debt restructuring (SDR), the money will come in next quarter that is in March 2018 but for this quarter we will have to provide and that's the negative point in the entire story.
Talking about NCLT, he said 15 percent provisioning required is limited in our case with regards to second list of National Company Law Tribunal (NCLT).
UCO Bank's Takkar said that if the company is coming out of SDR, we will have to make provisions accordingly.
He further said that in RComm we have an exposure of around Rs 700 crore.
Talking about business, he said we continue to see pressure on non-performing asset (NPA) and margin.
On NCLT front, he said we look forward to resolutions in NCLT.
Below is the verbatim transcript of the interview.
Latha: The company goes out of strategic debt restructuring (SDR) so technically for the last two quarters when they did not pay interest because they were under SDR will you have to provide?Bajaj: Yes, you are right. Once company is out of SDR, no doubt that money is going to come in the next quarter, this March 2018, but for this quarter we have to provide that is basically negative point in this entire story.
Latha: You will be able to write back the provisioning next quarter if and when it is paid back?Bajaj: That is there, but the thing is right now December quarter will be under strain.
Latha: What will be your provisioning load because of Reliance Communication coming out of SDR?Takkar: If this company is coming out of SDR we have to make provision as per Income Recognition and Asset Classification (IRAC) norms. So for the time being it will be a sub-standard so accordingly provision would be made so that is the position.
Latha: So 15 percent of your exposure is it?Takkar: Yes, that is right.
Sonia: What about you, you said that the provisioning will rise but what could the exact quantum of the provisioning be over the next two quarters?Bajaj: Our exposure is limited, it is not much it is only Rs 500 crore. So, in that case 15 percent of that we have to provide. We can do that. That is not a big chunk.
Latha: Generally, how is the provisioning likely to pan out from hereon because there are the bunch of cases in National Company Law Tribunal (NCLT) and there are still cases that are not even reaching NCLT? How much will the provisioning rise, will it be all through FY19?Bajaj: I think so whatever this second list of NCLT cases are there so in that case particularly whatever this 15 percent provisioning is required that amount is very limited in our case. If the cases second list are not admitted then even for this quarter we need not provide, only we have to see in the next quarter. Definitely there will be, for the next year also, there will be some strain on this provisioning requirement for the NCLT cases also.
Sonia: What about you? What kind of pressure do you see as far as provisioning is concerned and what is the exact quantum of exposure that UCO Bank has to Reliance Communication?Takkar: To Rel Comm we have exposure of around Rs 700 crore and for other provisions, as you know, for NCLT, the second list and also for the first list which we are making in three quarters, till March we have to make all these provisions. So, definitely there is going to be a big amount in this financial year, 2018.
The main thing we are looking for is the resolution of the account which are already under process, the first list of 12 accounts. So, hopefully that should be comfortably happening in the first quarter of the next financial year.
Latha: Any word on capital when you are likely to get and any idea how much?Takkar: No, we have given our request on the working, already had talks with the department of financial services (DFS) but how much amount and when it will be coming is difficult to say but it should be coming in the next quarter.
Sonia: What kind of pressure will all of this put on one, asset quality and two, on margins because your gross non-performing assets (NPA) have been deteriorating and margins also have been the lowest we have seen in the last many quarters. Should we expect more pressure there?Takkar: The pressure is definitely there and if you really see the NPA one of the reasons for increase in NPA specially in the percentage terms is because we have also not grown and that is again conscious decision because of the capital requirements. So that is one reason in percentage we are going up although in absolute terms we have not increased in the last two quarters if you see.
As far as the net interest margins (NIM) are concerned, when we make provisions and the fresh list is added we have to also write back the interest depending on from which date we have to write off. So that also affects our margins.
Latha: When do you think you may be back in the green?Takkar: Depending on various issues, like I told you we are looking forward to these resolutions happening under NCLT, if those start taking place I think by end of FY19 we should be again in black.
Latha: The bond yields have gone to 7.3; what will be the impact on your bank?Bajaj: If it remains close at the same level definitely there will be again a hit, means on this portfolio also because right now I don't have the exact figure but definitely there is a hit.
Latha: Mark to market hit?Bajaj: Yes.
Latha: What will you do in terms of loan growth this year?Bajaj: Loan growth because see we have already requested for the capital to the government and what we are expecting whatever newspaper reports are there in the month of January so it all depends on the capital because right now we are not growing due to the paucity of capital once that will get means regulatory as well growth capital definitely we will look at that because right now we are almost at the same level of our asset.
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