2-3 years spent on managing NPLs; see FY17 more profitable: SREI

SREI Infrastructure Finance reported good set of earnings in its fourth quarter result released on Thursday.

Net profit went up 51.9 percent to Rs 20.5 crore year-on-year (YoY) and net interest income (NII) increased 19.5 percent to Rs 211.7 crore (YoY).Things are looking up in the infra sector; road and power sectors have seen a pick-up, said Hemant Kanoria, CMD of SREI.

Speaking to CNBC-TV18, he said that the last 2-3 years have been spent on managing non-performing loans (NPLs) and expects FY17 profitability to be better than FY16.Below is the verbatim transcript of Hemant Kanoria's interview with Anuj Singhal and Sonia Shenoy on CNBC-TV18. Anuj: Good net profit growth and income growth as well, what led to this kind of growth and what’s the outlook for the next couple of quarters? A: As we were mentioning this particular year the profit has been about Rs 73 crore approximately compare to last year which was Rs 129 crore, so net profit, profit after tax (PAT) is lower than what it was last year and primarily because of the fact as you know that infrastructure sector has been under stress, but our total consolidated asset under management has grown from Rs 35,000 crore to Rs 36,000, so there has been a growth in the business as we have been giving the guidance for quite some time to the market on that, even our non-performing loan (NPLs) because gradually as the road sector has picked up and investments are going into the road sector and power also the things are looking much better, so therefore we have seen the non-performing asset (NPAs) have also come down and on our net NPL if you look at on consolidated basis from 4.7 percent gross NPA, it has come down to 4 percent and on a net basis from 3.2 percent it has come down to about 2.2 percent. In the equipment finance business there has been a sharp drop in the NPA from 4.7 percent the gross NPA has come down to 2.8 percent and net NPA from 3.6 percent to 1.9 percent, so this has been also a sharp drop in the equipment financing. In the equipment financing business what is also happened is in the last quarter onwards we have been seeing that there is a good growth because of the mining equipments sales which has picked up, even the construction equipment sales have picked up because of the road sector lot of investments are going there. So gradually we are seeing that the economy and especially in the infrastructure sector things are looking up, so the stress which was there earlier is gradually reducing. I am not saying that everything is totally hunky dory and everything has been eliminated but more or less in the last 2-3 years that we have been quite focussed in managing our NPL and managing any of the stress which is there in this particular sector, so it has started yielding result. Moreover the Viom transaction which was pending for quite some time though it is not reflected in the balance sheet for March 31 2016 because the money came in the month of April this year, so it will get reflected in this quarter onwards, but that has also brought in almost about Rs 3,000 crore into the company as liquidity. Overall, we are quite sanguine with the way things are going on things will be on better track moving forward. We are concentrating on the bottom line. We have been able to reduce the stress which is evident from the number which has come out in spite of the fact that people don’t feel so enthusiastic about the infrastructure sector still, but we are quite hopeful that things will start improving from quarter to quarter (QoQ). Even on our equipment financing business we have seen this particular growth in the last couple of quarters and moving forward because of the diversification of the equipment financing portfolio we see that there would be further growth that this year we expect better than last year and even the profitability will be better because the stress is getting reduced gradually. So overall, the results would it be better obviously definitely the results can always be better, but in this particular environment where everywhere else in the financial sector does not seem to be very enthusiastic. We feel that the hard days are over and now we will be moving towards better days. The dilution of Viom and now we are looking at also other assets and we have demonstrated in spite of the fact that the markets are very good, the dilutions can take place. Sonia: The street really likes you numbers and it’s good to hear that the gross NPAs have come down to about 4 percent in the infra business. Can you give us some more numbers on what the disbursement growth has been this time around, it has been almost 20 percent last quarter, what has it been this quarter and what about the AUM growth as well? A: So AUM growth from Rs 35,000 crore which was there last year it has gone up to Rs 36,000 crore, so there has been a growth of almost about a Rs 1,000 crore and actual number if you look at it because there is a lot of recoveries takes place and as we have mentioned in the guidance which we have been giving is that we will be very conscious about the kind of disbursements that we are doing and cautious about the quality of the asset and that is what has been the biggest effort on our part and focus. Sonia: Have you and your team taken a decision on whether you will go ahead and apply for the bank licence or not? A: It is too early days because it is only the draft guidelines which are out. We would definitely be giving some recommendations because I think that these are draft guidelines and Reserve Bank of India (RBI) would want certain suggestions to come in, so we are also going to give our suggestions and let us see that if the final guidelines basically is in consonance with our thinking and the board then takes a decision that we should apply then we will go ahead, but at this juncture it is too early to say that whether we are going to apply or not apply.