PNB Gilts' average borrowing cost in the third quarter was 6.38 percent compared to 6.88 percent for the same period last fiscal, said Managing Director SK Dubey throwing more light on the strong Q3 performance in an interview to CNBC-TV18.
The company reported a net profit of Rs 66 crore in Q3 versus Rs 9 crore reported for the same quarter previous fiscal. Total income was up at Rs 166.3 crore versus Rs 90.2 crore. EBITDA came in at 82 percent at Rs 162 crore versus Rs 87 crore YoY. If the fiscal deficit is at 3.5 percent then ten-year yield would go up by another 20 basis points but if it is 3 percent then 10-year would go down by another 10 basis points.
The 10-year yield currently is around 6.39 percent.
According to him, the Reserve Bank of India will cut rates in the next monetary policy on back of stability in inflation and rupee.Below is the verbatim transcript of S K Dubey’s interview to Reema Tendulkar & Nigel D'Souza.
Nigel: Strong set of numbers so wanted to understand a couple of aspects - what was the average duration of your portfolio in quarter three - that is the first part of my query?
A: Average duration is 3.5 to 4.
Nigel: Could you also tell us out of your total portfolio what is the current size of your book and how much of it is held till maturity and how much of it is available for sale?
A: Our held to maturity is not more than Rs 700 crore because that is the Reserve Bank of India (RBI) restriction. Our net owned funds can be invested -- the rest is trading.
Nigel: So how much is that?
A: Our average portfolio during this period was Rs 3,000 crore, an average size of the portfolio during the quarter.
Reema: Which includes Rs 700 crore held to maturity securities?
A: Yes that includes Rs 700 crore of HTM.
Reema: Quarter three of course was a good quarter for the company given the way the yields moved. How is quarter four expected to shape up for you?
A: We have two issues that we are waiting for. One is the Budget and second is the geo-political situation if it could affect us adversely. If the Budget is having 3 percent fiscal deficit, the borrowing numbers would be the same as it was last year. The net borrowing, we expect, should be in the range of Rs 408 lakh crore like normal but if it is 3.5 percent say another Rs 70,000 crore extra borrowing. These are the two things that will affect.
However, we are looking forward to February with some hope of rate cut, the inflation being what it is. In January RBI stipulation of 5 percent should be easily met. We have approximately Rs 2.5 lakh crore of liquidity in the system. Rupee is stable, so we are looking forward to something good in February otherwise there are not many challenges and quarter four should be good.
Reema: What is your own estimate of how the 10-year yield might move? It is currently at 6.39?
A: If it is 6.4 depending on what is the total position of fiscal deficit, so if it is 3.5 we expect it to go up by another 20 basis point. If it is 3, it could go down by another 10 basis points and that is the way we are looking at it but either way it should provide us opportunities.
Nigel: I wanted to understand your borrowing mix? What is it currently how much of your borrowing mix comes in from Punjab National Bank (PNB), you could tell us the other sources as well that is the first part and give us some kind of outlook going ahead because your earnings will be very lumpy with the movement of the bond yields, so just for investors if you could give us some sense of your revenues, your flows going ahead?
A: Our borrowings are not from PNB. Our borrowings are from the market. Our borrowing from PNB is only on the last day of every quarter because Call money is not easily available on that day, but our borrowings are always from Call and outside market. No borrowing from PNB.
Nigel: Your average borrowing cost for the last quarter?
A: 6.08 percent.
Reema: What was the decline seen in your average borrowing cost?
A: In last year's Q3 it was 6.88 and this year Q3 is 6.38.
Reema: So a decline of about 50 bps?
A: Yes.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
