Although bankers agree that increased allocations towards NHAI and Industrial Corridors could spur fresh awards, they say they will think twice before lending out to the beleaguered sector.
If everybody is approaching the market at the same time then it would be a huge rush and the valuations will suffer.
SL Bansal
CMD
OBC
Despite the Budget 2014 providing impetus for infra sector, banks say they will think twice before lending out to the beleaguered sector.
Speaking to CNBC-TV18, Oriental Bank of Commerce ( OBC ) and Federal Bank said they will be cautious in dealing with the infastructure companies. Although bankers agreed that increased allocations towards NHAI and Industrial Corridors could spur fresh awards.
Below is the transcript of SL Bansal and Shyam Shrinivasan's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.
Ekta: There was lot of incentives which came out for the public sector undertaking (PSU) banking space. We do understand that the recapitalisation was increased to around Rs 13,400 crore in this Budget, have you got more clarity in terms of what the government's recapitalisation plan will look like going forward, whether they will only hold majority stake in the PSUs and you will only be able to offload shares to the retail space?
Bansal: Yesterday the Budget was presented. We need to wait for some clarity. Some clarifications will come from Reserve Bank of India (RBI) on how to raise long-term deposits and what will be the operative guidelines.
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As regards to the capital infusion plan, I believe that government of India is now in a mood to relax upto 51 percent. Earlier the government of India was committed to hold 58 percent of the equity of the public sector bank. Now they will on a case-to-case basis permit banks to go down to 51 percent. So we can raise money from the market or through qualified institutional placement (QIP).
Ekta: Do you think that there will be enough appetite only from the retail space to absorb so much money if in case there is divestment only towards retail of banking shares?
Bansal: You have to space it out I do not think all banks are coming at the same time. Now the banks need to study the market well and at the appropriate time they need to approach the market otherwise if everybody is approaching the market at the same time then it would be a huge rush and the valuations will suffer.
Anuj: What is your first comment about the Budget, how would the private sector banking industry read into it?
Shrinivasan: There are three areas you can look at. For banks like us which has a very sharp focus on the MSME and particularly the SME segment, there is a fair amount of juice and I expect that in the coming months we will see action around it.
Second is the one that the industry has been greatly hurt by -- it it the souring non-performing assets (NPAs) and the formation of the debt recovery tribunal (DRT) is going to be helpful on that front.
Third is the funding on the long-term infrastructure project. So on these counts, I would say this is positive. Also the benefits for the individuals will certainly bring in more in terms of the savings opportunity for banks. So broadly I would say a positive, there could have been much more but I guess this is the beginning. From private sector banks in particular, MSME segment specific for our bank is a very good outcome.
Oriental Bank stock price
On July 11, 2014, at 14:15 hrs Oriental Bank of Commerce was quoting at Rs 273.30, down Rs 13.95, or 4.86 percent. The 52-week high of the share was Rs 377.30 and the 52-week low was Rs 121.40.
The company's trailing 12-month (TTM) EPS was at Rs 38.00 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 7.19. The latest book value of the company is Rs 447.91 per share. At current value, the price-to-book value of the company is 0.61.
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