RBI approved to raise Rs 100 cr capital: Dhanlaxmi Bank MD

Moneycontrol Bureau

Private sector lender Dhanlaxmi Bank is pedaling hard to sustain its turnaround story. The bank on Monday reported a net profit of Rs 3.58 crore in the April-June quarter, 2013 compared with a net loss of Rs 11.81 crore in the corresponding quarter of the previous year. The bank had gone through a management change more than year back.
According to P G Jayakumar, the managing director of the bank, they are not expecting any significant slippages (or performing loans slipped into non-performing categories) the coming quarters. It recorded Rs 75 crore slippages during the first quarter.
"We are taking very stringent actions in the case of already non-performing asset (NPA) accounts and with regards to the other accounts monitoring is so strict and vigils were all around right from the branches to the head office. I do not expect any further big slippage," he told CNBC TV18 in an interview.
Dhanlaxmi Bank has set a target to reduce gross NPA to 2.5 percent from 5.78 percent currently and net NPA from 4.10 percent to 1.50 percent by FY14. Must read: Will SBI turn around after lower-than-expected Q1 earnings?
Meanwhile, the bank is bracing up for capital raising plans approved by the RBI for Rs 100 crore. With no-impressive ratings, the bank does not seem to be darling among institutional investors. However, it managed to get investment commitments of about Rs 37.50 crore. Below is the verbatim transcript of PG Jayakumar’s interview on CNBC-TV18 Q: What did the slippages, restructured assets and net interest margins (NIM) stood at in this quarter?
A: Our restructured assets are about Rs 93 crore. NIM is 2.11 percent. Yield is 12.20. Slippages are about Rs 75 crore. Q: After two quarters of losses you have turned the corner at least on that front. You have reported a profit this time around, but asset quality continues to be a worry. What is the trend that you are seeing from hereon in terms of asset quality? Where do you think it is going to stabilise?
A: This particular quarter even though there was slippage of about Rs 75 crore, going forward in the full year we do not expect these kind of slippages, because we are taking very stringent actions in the case of already non-performing asset (NPA) accounts and with regards to the other accounts monitoring is so strict and vigils were all around right from the branches to the head office, so I do not expect any further big slippage, but maybe in the full year our target is to reduce gross NPA to 2.5 percent from 5.78 percent now and net NPA from 4.10 percent to 1.50 percent by FY14.
We have taken all steps towards that and all this will fall in place. Recovery efforts are going on and many actions that we have taken against the defaulters are showing results, in the current two quarters we will be able to recover substantial amount. Last year, out of Rs 522 crore slippage we collected Rs 228 crore in the last financial year. Like that we have an organised effort and this time also we are confident to bring it down drastically. Q: What were the recoveries as well as upgradations in the quarter gone by? What could we expect for the full year since that is where the focus of the bank is going to be on?
A: Upgradation is not much this time. Recovery is about Rs 16 crore in full quarter. We will recover more than Rs 300 crore in full year. Q: In April you have already raised about Rs 70 crore via the qualified institutional placement (QIP), but are there any more plans to raise fresh funds?
A: Reserve Bank of India (RBI) gave us permission to raise another Rs 100 crore through the preferential allotment route and three industrials have already committed to invest about Rs 37.50 crore. It needs an annual general meeting (AGM) approval which will be on August 27 and with that our capital adequacy will also go up further beyond 12 percent. Presently our capital adequacy is 11.73 percent and it will go further up around 12.5 percent. With Rs 100 crore increase it will be 12.5 percent and 12.75 percent. Q: What was the provision coverage ratio? The last figure that we can see is for December 2012 where it was quite low at 31 percent.
A: Provision coverage is around 30.68 percent mainly because most of the NPA is of recent period and most of them are recovered so the provision needed is comparatively lower like 15 percent or so and that is why the coverage is less. Q: Are there any plans that the bank has to raise base rates?
A: We do not have any plan to increase the base rate as of now. The rate of interest in the deposit liability side is going up, cost of money going up is a concern for all of us. We have one advantage that we are lending in our semi-urban rural centers mostly to the small and medium enterprise (SME) segment and the middle segment of the population. So, we do not feel that we have any problem in realisation of better rate of interest when compared to the advances to the corporates.