Okay with Q1 performance, see pick-up by Q4: Srei Infra

Srei Infra MD Hemant Kanoria says the quartery result is a reflection of the situation on ground. He said improvement in the infrastructure space will left performance of the company.However, Kanoria is comfortable with the prformance."In spite of the fact that infrastructure sector is doing badly, we have been able to manage risks well, we have been able to maintain profitability. We were quite cautious in our lending." He sees things improving by the last quarter of this fiscal.Below is the transcript of Hemant Kanoria’s interview with Anuj Singhal and Eka Batra on CNBC-TV18. Anuj: Not a good set of numbers, your net interest income (NII) was down, profit was down, what happened in the quarter and what is the outlook for future? A: Compared to the last quarter the profits have improved but as in the infrastructure we have all seen that though the government has been trying to do their best and there are some projects which have been debottlenecked but it is still going to take time before things start improving substantially. So, our results also will be basically dependent upon the improvements as we see on the ground. The interest rates have come down so therefore there is a small improvement in the profit compared to the last quarter that we have seen. The disbursements also will take time before it will pick up because this quarter our disbursement has been close to about Rs 2,700 crore which is not bad but it is not as good as we had expected it to be. Similarly, the total assets under management also stands at Rs 35,000 so it is almost flat. So, we are also being very cautious in the new disbursements which are there for new loans as all of us we know that infrastructure has not come out of the deeps. Non-performing loans (NPLs) also gradually has flattened now because we don’t see any substantial NPLs coming in. Whatever has been there in the past has already been more or less provided for and we see as the recovery in the economy takes place then the NPL recovery will also start off. So, we are almost at the rock bottom which for the last two quarters we have been seeing that we are almost at the rock bottom, things will start slowly improving, the interest rates have come down in the last couple of quarters that the Reserve Bank of India (RBI) has been announcing which has had some effect on the reduction of the interest cost for the company. However, at the same time there is nothing substantial. So, as the whole market for the infrastructure sector is undergoing and we feel that and we see that fortunately we are in a more comfortable position in spite of the fact that infrastructure sector is doing badly but we have been able to manage the risks well, we have been able to maintain profitability in spite of all the problems which are there in the sector because we were quite cautious initially also in our lending. So, overall we are quite comfortable and we are absolutely sure that in the future, things will improve but I don’t see that there will be a substantial improvement happening before the last quarter of this financial year. Ekta: Tell us about your gross NPLs this quarter, what were they maybe on a consolidated or a standalone basis and how have they moved quarter-on-quarter (Q-o-Q)? A: Last quarter the gross NPA was 4.71 percent, this quarter it is 4.83 percent so there has been just a slight increase. However, the net NPL from 3.2 percent has come down to 3.12 percent and that has been the basic effect. The yield also has been more or less constant. The NII has marginally improved from 2.56 percent to about 2.84 percent. So, as I said more or less the result is flat. Small improvement in the profit compared to the last quarter but it is going to be sometime before we see substantial improvement either in the profits or in the disbursements because being in the infrastructure sector and focused in this sector itself we don’t see too many wide variations happening in the next couple of quarters. So, I think that we should be in a position to announce better results in the next financial year. This year again it has been a storm and many of the infrastructure companies were just swept away. So, in that way we have been more sturdy and standing solid on the ground. So, that would be our strategy for the next couple of quarters.