Ever since India got its first non-Congress government with a clear mandate on May 26, government-owned banks along with non-banking financial institutions (NBFCs) have been buzzing in trade. The banking sector is encouraging companies to sell their non-core assets to gain capital. CNBC-TV18 spoke to Malay Mukherjee, CEO and MD, IFCI , which has decent amount of non-core assets to get his opinion on the matter.
The state-run lender has non-core assets of around Rs 12,000 crore including Rs 7,000 crore worth of listed assets. The company is looking to divest its stake in non-core assets not just for the purpose of profitability but to utilise the capital for further creation of other assets.
Also Read: Avoid cos with high leverage, cautious on NBFCs: JP Morgan
Below is verbatim transcript of Malay Mukherjee's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: What amount of non-core investments have you made at this point in time, both listed and non-listed?
A: We have approximately Rs 12,000 crore of all listed and non-listed investments in our book.
Latha: How much of it is listed?
A: It is around Rs 7,000 crore.
Sonia: Are you looking to divest stake in any of the non-core assets that you have?
A: Yes, we are in the process of doing that and one or two companies are in the radar so it will not be proper to take the names of the companies but we are looking at the synergies. There are some investments that we made in one or two companies and there are other subsidiaries that are doing same kind of business. To get a better value we have taken a decision that we should divest some of the stakes.
Latha: How much do you hope to make by these asset sales?
A: We are not exactly looking at the profitability because it is a continuous process for non-banking financial company (NBFC), so whatever money we will recover, we will not take under profit but will utilise this for further creation of other assets.
Latha: What amount will you get out of that?
A: We are expecting approximately Rs 2,000 crore.
Sonia: Will you divest more than 20 percent stake in your subsidiary IFCI factors?
A: No, not IFCI factor. IFCI factor may not be more than 20 percent, it will be less than that, if at all that happens. This is because the process is on and we have still not got any good bidder for that and so, IFCI factor is one of the subsidiaries we are thinking of divesting some of the stakes. We also have other subsidiaries where we are thinking to reduce the stake.
Sonia: By when do you think you will be able to divest stake in IFCI factors? Will it be in FY15 itself?
A: Yes, it has to happen before September.
Latha: You also have stakes in National Stock Exchange (NSE), are you planning to do anything there?
A: We had some stake in the NSE and since we have become a majority stakeholder in the Stockholding Corporation our direct and indirect share has gone up to almost 8.4 percent. So that is also on the radar, we may divest some of our stakes in the NSE.
Latha: You have to legally bring it down to below 5 percent; can you hold up to 8.4 percent?
A: This is direct plus indirect.
Latha: Are you allowed, legally you are not required or mandated to?
A: No, we are not mandated anything on that.
Sonia: Is the Rs 2,000 crore, that you told us about, the total amount that you will raise from selling all your non-core assets?
A: No, this Rs 2,000 crores is the investment that we have in our subsidiaries and our other assets, but there are many other non-core assets as well. This is basically the figures related to the subsidiaries.
Latha: So that basically includes factors?
A: Yes, factors. We have a company at Chennai called IFIN and as you took the name of NSE, there are companies that are stockholding corporations, we have many subsidiaries and we also have a venture capital fund.
Sonia: In terms of a timeline for the stake that you acquired from stockholding corp, the 20 percent; when do you look to divest that, or is that in the pipeline as well?
A: No. We took that strategically to have a majority stake there and they are doing good job, we do not intend to divest anything from the stockholding at least in this financial year.
Latha: You brought down your gross bad loans from 22 percent to 17 percent, when you last reported the numbers, how are you looking at the period since March 31, do you expect a substantial fall in bad assets in this quarter?
A: IFCI traditionally has never sold off any assets and if at all it has done some four-five years back, it was only on cash basis. Now we are looking at some of the assets where we can sell some assets by way of SR and cash mix back, so if that happens gross NPA and net NPA will drastically come down. Therefore, the process is on and maybe when September result comes in we will show an improvement.
Latha: Why September sir, why not June?
A: June will be too early to expect a drastic thing to happen. Maybe if I am increasing my advance book very high percentage wise you will see that the figures have come down. But if you look at it amount wise it will come down by September and again in March, so if we look at March 31, 2014 figures and compare the asset book and non-performing asset (NPA) book with March 2015, we presume at least 2 percent net will come down.
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