Companies & Sectors
SBI hopeful of Kingfisher coming up with 'tangible' plans

SBI expects Vijay Mallya to come up with something tangible for the survival of Kingfisher Airlines in the wake of liberalisation in FDI in aviation

Mumbai: State Bank of India (SBI), the lead lender to Kingfisher Airlines has expressed a hope that the company chairman Vijay Mallya will come up with 'something tangible' for its revival in the wake of liberalisation in foreign direct investment (FDI) in the sector, reports PTI.


"We are quite hopeful ... we are waiting for a mutually convenient date and I think to my mind he (Mallya) will come up only when there is something tangible," Pratip Chaudhury, Chairman of SBI told reporters in Mumbai.


The negotiations have to be conducted in greater confidentiality and with some patience as it is not an investment alone, it is the valuation in the price, he said.


"But if you see the stock prices of aviation companies, including Kingfisher, going up, which obviously is indicative of higher interest from the foreign aviation companies," he said.


SBI, the leader of the 17-member consortium, has an exposure of Rs1,500 crore to Kingfisher Airlines. Earlier it had termed this as an non-performing asset (NPA). Banks together have an exposure of nearly Rs7,000 crore in the airline which have all become non-performing assets since January.


"At one point it (Kingfisher) looked absolutely hopeless. It looks relatively better (now). But still we do not have definite pointers to that. But it is a very good name, from all accounts. (In) UB Group, Mallya is very keen to retain control because his entire branding, entire image revolves around Kingfisher, lot of his products are named around Kingfisher," Chaudhury said.


Earlier, the lenders consortium had asked Mallya to personally make a presentation on turnaround plan. They had also asked HDFC Securities to do a valuation of property belonging to the promoters in Mumbai.


"We think they will do everything possible, including big sacrifices, to keep that name going. And we have his personal guarantee which shows his commitment and the UB group, in itself, from its liquor business, from its other unrelated business, can unlock a lot of cash which we think would be deployed here. And aviation is a high capital business so only companies with deep pockets can sustain," he added.


Centre approves Rs1.9 lakh crore debt reijg of power discoms

Under the scheme approved by the Cabinet Committee, 50% of the short-term outstanding liabilities would be taken over by state governments while rest would be restructured by providing moratorium on principle and best possible terms for repayments

New Delhi: Pushing new reforms in the power sector, the union government has approved restructuring of Rs1.9 lakh crore debt of State Electricity Boards (SEBs) in a move to turnaround the near-bankrupt power distribution companies, reports PTI.


Under the scheme approved by the Cabinet Committee on Economic Affairs (CCEA), 50% of the short-term outstanding liabilities would be taken over by state governments.


Balance 50% loans would be restructured by providing moratorium on principle and best possible terms for repayments, an official statement said.


As part of mandatory condition, 50% of the outstanding liabilities up to 31 March 2012 is to be taken over by the state governments. This shall be first converted into bonds to be issued by discoms to participating lenders, duly backed by the state government's guarantee.


The scheme is effective as soon as notified and will remain open up to 31 December 2012 unless extended by the government, the statement said.


The support under the scheme will be available for all participating state-owned discoms on fulfilling short-term mandatory conditions, it said.


The restructuring or reschedulement of loans is to be accompanied by concrete and measurable actions by discoms or states to improve the operational performance of the distribution utilities.


As per the statement, the takeover of liability by state governments from discoms in the next two-five years by way of special securities and repayment and interest payment to be done by state governments till the date of takeover.


The approved scheme is formulated based on report of expert group headed by BK Chaturvedi, Member (Energy) Planning Commission and deliberations in the PMO and Finance Ministry, it said.


SBI hints at more cuts in lending rate

Given that SBI has already reduced the base rate, another round of rate cut may be difficult but the bank may go for reducing rates and thereby cutting spreads in select loan categories

Mumbai: State Bank of India (SBI) has said though there is little room for further reduction in the base rate, it could cut lending rates in select categories, as it recently did for the small and medium enterprises (SMEs), home and auto loans, reports PTI.


Given that the bank has already reduced the base rate, another round of rate cut may be difficult but the bank may go for reducing rates and thereby cutting spreads in select loan categories, SBI Chairman Pratip Chaudhuri told reporters in Mumbai.


The bank had slashed its base rate by 0.25% to 9.75% last Tuesday in a bid to transmit the benefit of the 0.25% reduction in the cash reserve ratio by the Reserve Bank of India (RBI).


Chaudhuri said with the reduction in base rate, the bank was leading the path of interest rate reduction in the system, in sync with the wishes of the central bank.


The bank, which had also reduced its deposit rates in some specific tenors in the recent past due to subdued credit growth, currently has an excess liquidity of over Rs70,000 crore, including Rs50,000 crore in SLR bonds.


Chaudhuri also said despite muted credit growth, the bank is hopeful of meeting its credit growth target of 18-20% on the back of recent reduction in the base rate.


According to Chaudhuri, credit growth is up 14.5% as of now, while deposits are clipping at 16%. The bank also aims at 20-25% growth in auto and home loan in the current fiscal on the back of recent rate reduction in these segments.


Referring to net interest margin (NIM), he said that NIM for domestic business till 31st August was 3.94%.


Diwakar Gupta, chief financial officer and managing director of SBI said that the overall NIM target (domestic plus international) for first half of the year is 3.6% and pointed out that net interest income was better in August against July.


The bank also informed that asset quality in the second quarter was marginally better than the previous quarter.


Referring to the forthcoming restructuring of state electricity boards (SEBs), Chaudhuri said it will not have any significant impact on the bank as its total exposure to SEBs is only Rs400 crore.


The Cabinet is set to clear a Rs1.2 lakh crore loan recast of 25 SEBs which will also involve a tariff hike by the discoms, which are sitting on a Rs2 lakh crore debt.


The bank along with the associates would require Rs1-1.25 lakh crore in capital for Basel III implementation between 2015 and 2018, taking into account credit growth of 20%, Gupta said, adding the bank has many options including a qualified institutional placement to raise the required capital.


The bank also informed that there is no plan to merge any of the subsidiaries till tier-I capital of the parent bank increases as SBI would require capital of Rs2,000 crore for each merger.


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