Rajiv Lall of IDFC said his firm was sitting on 21 percent Tier-I capital and had enough capital to ride out the worst storm.
IDFC 's provisions will increase over the next couple of quarters, the infrastructure financier's executive chairman Rajiv lall said in an interview to CNBC-TV-18's Menaka Doshi.
On the positive side, Lall said his firm was sitting on 21 percent Tier-I capital and had enough capital to ride out the worst storm.
He said the health of gas power plants would be the key to IDFC's asset quality.
According to him pure infrastructure loan growth for IDFC is likely to take place in the next fiscal because of their transition to bank. "Even if there is an opportunity, pure market based to grow the balance sheet, we may not want to because our starting position as a bank becomes that much more complex," says Lall.
Below is the transcript of Rajiv Lall's interview to CNBC-TV18's Menaka Doshi
Q: What your asset quality see an improvement?
A: Even as the economy starts improving, you will see asset quality deteriorating for a couple of quarters and then it will catch up. So I suspect that asset quality continues to deteriorate.
Q: Would you say that for IDFC as well?
A: I would say that for IDFC as well?
Q: How much worse is it going to get?
A: Not much worse but yes it will get worse. Everything is relative, we are much better than the rest of the banking system; even taking into account the fact that we are concentrated so high in infrastructure.
Q: But you had a quarter of very heavy provisioning?
A: We have. See I will tell you where IDFC comes out on all of this. It is all out in the public domain, I am not letting any cat out of the bag.
Our fortunate position is that we have never been shy of raising capital in order to strengthen our balance sheet. So we are sitting on 21 percent tier I capital. What that means is that even if this government had not been elected and we had ended up with a weak dispensation, bad for business etc which would have meant that growth would not pick up and asset quality by definition would continue to worsen further. We have enough capital to ride out the worst possible storm and that is our strength at IDFC.
So, it doesn't affect our ability to launch the bank or survive the worst possible scenario survival.
more to come
IDFC stock price
On June 05, 2014, at 11:15 hrs IDFC was quoting at Rs 136.65, up Rs 0.80, or 0.59 percent. The 52-week high of the share was Rs 150.90 and the 52-week low was Rs 76.25.
The company's trailing 12-month (TTM) EPS was at Rs 11.22 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 12.18. The latest book value of the company is Rs 88.76 per share. At current value, the price-to-book value of the company is 1.54.
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