Won't sell USL shares; hope to recover KFA investment: SREI

SREI Infra is still optimistic on recovering its investment in cash-strapped Kingfisher Airlines (KFA), CMD of the non-banking finance company Hemant Kanoria said in an interview to CNBC-TV18.

A debt fund operated by the Kolkata-based Srei Infrastructure had bought out the entire exposure of ICICI Bank in KFA, worth around Rs 430 crore in July this year. He further added that the company has no plans to liquidate the shares of United Spirits in the near-term. Its fund management arm Srei AMC had acquired 49 lakh shares of United Spirits. “At this a particular juncture we have not yet decided that we will be liquidating the shares to get the money because we don’t see that it is in an unsafe zone,” he elaboarted. Also Read: Profitability to improve in Q3; rise in NPA unlikely, says SREI Below is the verbatim transcript of Hemant Kanoria’s interview with CNBC-TV18 Q: What is happening to the shares that you hold in United Spirits? Yesterday also we had a block deal; there was a buzz that SREI Infrastructure was the seller but it came out that that was not the case. What is your plan with those shares? A: Our plan is very clear which we have been articulating since the last one year now. Since we have made an investment that this is the security which we have of United Spirits (USL) share is against the loan which we have given and which was novated from ICICI Bank. So, therefore till the time did we see that there is a threat that the loan will not come back we don’t have to go and liquidate the shares. So, at this a particular juncture we have not yet decided that we will be liquidating the shares to get the money because we don’t see that it is in an unsafe zone. So, we are happy our business is to lend and this has been invested through a fund so therefore there other investors also. No one is at present panicking that they need to get their money. So, therefore the fund, when it takes a decision of getting the money from the borrowers and if it does not in the event that it does not get then only it will go into liquidate the shares. Before that there is no reason why we should panic. Q: United Spirits stock in itself is doubled since you have got it on account of your loan. The internal rate of return (IRRs) as well on this would be much high than what you would have earlier anticipated. So, is it not a consideration that given the kind of money that you made on it that you would look to liquidate it and cash out? A: As a matter of fact, it is like the fund has taken the loan and SREI is a fund manager. So, therefore it is – taking a classical example that someone has borrowed against their house and if they do not pay then only the lender will go and liquidate the property. Just because the fact that the property prices are appreciating, the lender will not go and liquidate it and make a profit out of it. The lenders business is to lend and earn an interest; the security value increases which is good for the lenders. The similar position is for us where the fund is concerned. So, the fund has lent the money and today the security is appreciated so it is good from the security perspective for the fund. Q: You still have hopes of recovering money from Kingfisher in that case? A: Definitely, we have good security so therefore there is nothing to get concerned about it. In the event that we do not get the money then we will go into liquidate the security. However, at this particular juncture that situation has not risen. Q: Is there any timeline that you have decided in principle that by when will you see if the money is coming or at least there is some indication of money coming back before you take the step of liquidating the collateral? A: The fund investors at present are comfortable. As soon as the investors say that they want to get their money back or they would like to liquidate then we will have to take a call accordingly. It is through the fund so the fund investors have to take the decision.