Month: May 2021

PNB Housing Finance board to consider fund-raising on May 31

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The existing brand arrangement dated December 7, 2009, will continue to govern use of the PNB trademark until PNB’s shareholding in the housing finance company is 30% or more.

The board of PNB Housing Finance will meet on May 31 to consider fund-raising. The fund-raising by the non-bank lender was long pending after it had announced to raise Rs 1,800 crore through a preferential or rights issue in November 2020. However, the plan was derailed as parent Punjab National Bank (PNB) did not get the approval from the Reserve Bank of India to infuse capital into PNB Housing.

During an analyst call in April 2021, Hardayal Prasad, MD and CEO of PNB Housing Finance, said: “As you are aware that we were waiting for the capital raise with participation of PNB and Rs 600 crore was earmarked since then. But after, the permission was not given. So, we have initiated the process of evaluating all options and modes for the funds raise.”

Interestingly, the non-bank lender has also disclosed separately on Tuesday that it has entered into a fresh trademark agreement with PNB, which gives the parent right to withdraw its brand name from the mortgage lender. The new trademark agreement will be applicable if the shareholding of PNB in PNB Housing Finance falls below 30%. Currently, PNB holds 33% stake in the housing finance company. FE learned that the new trademark agreement has been signed as any equity raising by PNB Housing Finance would dilute PNB’s shareholding in it.

The existing brand arrangement dated December 7, 2009, will continue to govern use of the PNB trademark until PNB’s shareholding in the housing finance company is 30% or more. Upon PNB’s shareholding falling below 30%, the new agreement dated May 24 will replace the existing agreement, the housing finance company said.

The fresh agreement includes a royalty clause as well. In the event of PNB’s shareholding falling below 30%, PNB housing will pay a royalty between Rs 15 crore and Rs 30 crore. The royalty would be 0.2% of its revenue or 2% of the net profit, whichever is higher.

PNB Housing Finance had earlier registered a net profit of Rs 127 crore during the March quarter (Q4FY21), against a net loss of Rs 242 crore a year ago same period. The lender was able to curtail expenses by 28% year-on-year (y-o-y) to Rs 1,646 crore during the March quarter. However, the NBFC’s total revenue declined 6% y-o-y to Rs 1,834 crore in Q3FY21. The lender’s capital to risk weighted assets ratio (CRAR) was at 18.73% at the end of March 2021, falling from 20.06% a quarter ago.

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Manappuram Finance Q4 net rises 18% to Rs 468 crore

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For the whole of FY21, the company reported a consolidated net profit of Rs 1,724.95 crore, against Rs 1,480.30 crore in the year-ago period.T

NBFC Manappuram Finance on Wednesday reported a 17.62% year-on-year (y-o-y) increase in its consolidated net profit to Rs 468.35 crore for the fourth quarter of FY21.

The Kerala-based gold loan lender, which also operates a home loan, microfinance and commercial vehicle leasing subsidiary, has reported a standalone net profit of Rs 457.95 crore for the fourth quarter of last fiscal, an increase of 34.79% from Rs 339.76 crore reported in the year-ago quarter.

However, sequentially, the lender reported a 1.58% fall in the net profit, from Rs 465.29 crore in Q3 of FY21. The gold loan portfolio also declined quarter-on-quarter (q-o-q) by 5.61% to Rs 19,077.05 crore in Q4, from Rs 20,211.58 crore reported in Q3FY21.

For the whole of FY21, the company reported a consolidated net profit of Rs 1,724.95 crore, against Rs 1,480.30 crore in the year-ago period.The NBFC’s operating income for the year stood at Rs 6,330.55 crore, up 15.83% from Rs 5,465.32 crore recorded in the previous year.

VP Nandakumar, MD & CEO, said, “Our performance is particularly satisfactory given the multiple challenges faced throughout this pandemic-affected year. Despite all disruptions due to lockdowns, the consequent slowdown in economic activity and consumption and volatility in gold prices, we have succeeded in posting our best-ever full-year results, with significant growth in business and profitability.”

The company’s consolidated assets under management (AUM) stood at Rs 27,224.22 crore, up 7.89% in comparison to Rs 25,234.03 crore in the previous year. Growth was led by gold loans which grew by 12.44% to reach Rs 19,077.05 crore.

The capital adequacy ratio (standalone) is reported at 28.88%. The net NPA position stood at 1.53%, and gross NPA at 1.92% as of March 31, 2021.

The board of directors approved payment of an interim dividend of Rs 0.75 per share of the face value of Rs 2.

Madhu Mohan, general manager, has been re-appointed the chief risk officer for a period of one year with effect from July 17, 2021, the company said in a regulatory filing.

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Banks ready to transfer 37 NPAs worth ₹92,000 crore to NARCL

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Banks have so far zeroed-in on 37 stressed assets, with exposure aggregating to about ₹92,000 crore, that can be transferred to the National Asset Reconstruction Company Ltd (NARCL), which is being set up by lenders jointly.

The assets to be transferred to NARCL include those of Videocon Industries, Reliance Naval & Engineering, and Essar Power Gujarat and Coastal Energy, according to bankers. Banks had lent to these entities as part of a consortium.

“Suppose the ₹92,000-crore exposure is transferred to NARCL at 70 per cent haircut. So, it will buy the exposure at ₹27,600 crore. Of the ₹27,600 crore, lenders will get upfront cash of 15 per cent (₹4,140 crore) and the balance (₹23,460 crore) by way of Security Receipts (SRs), which are likely to have government guarantee (partial/full),” said an executive of a state-owned bank.

Upfront cash

The upfront cash that NARCL will give will result in provision write-back for the lenders, though it will be small.

“NARCL may buy all the loans put together at 30 per cent. But if the recovery is higher, say, 40 per cent, lenders will get the benefit via SRs,” the executive quoted above said.

He underscored that a few more Joint Lenders Forum meetings will be organised to arrive at a consensus on transferring more stressed assets.

The criteria prescribed by the Indian Banks’ Association (IBA) for the transfer of stressed assets to NARCL is that they should have been 100 per cent provided for, not be categorised as fraud, and should not be close to a resolution or recovery.

The IBA is spearheading the formation of NARCL in consultation with the Finance Ministry and the Reserve Bank of India. Stressed assets with principal outstanding of ₹500 crore and above, aggregating about ₹1.5-lakh crore, are expected to be transferred to NARCL.

Besides banks, state-owned non-banking finance companies in the power sector — Power Finance Corporation and Rural Electrification Corporation — are likely to contribute to the equity of NARCL and sell to it the stressed assets in their portfolio.

Will alter balance-sheets

NARCL may structurally alter the balance-sheets of lenders in such a way that it will further the government’s agenda of divesting its stake in IDBI Bank and privatising two public sector banks. Once chunky stressed assets are out of their books, the valuation of these banks will improve, making them more saleable, say market experts.

Finance Minister Nirmala Sitharaman, in her Budget speech on February 1, observed that the high level of provisioning by PSBs on their stressed assets calls for measures to clean up their books.

In this regard, she had said that an Asset Reconstruction Company and an Asset Management Company would be set up to consolidate and take over the stressed debt and then manage and dispose of the assets to Alternate Investment Funds (AIFs) and other investors for eventual value realisation.

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Karnataka Bank Q4 net up 14.83 per cent

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Karnataka Bank Ltd registered a net profit of ₹31.36 crore during the fourth quarter of 2020-21 as against a net profit of ₹27.31 crore in the corresponding period of the previous fiscal, recording a growth of 14.83 per cent.

The board of directors of the bank, which met on Wednesday, approved the audited annual financial results for the period ended March 31 and also recommended a dividend of 18 per cent to be approved in the ensuing 97th annual general meeting.

The bank registered a net profit of ₹482.57 crore for 2020-21 as against ₹431.78 crore in 2019-20, recording a growth of 11.76 per cent.

Terming the annual result as the best result during tough conditions triggered by the pandemic, Mahabaleshwara MS, Managing Director and Chief Executive Officer of the bank, said this clearly demonstrates the resilience of the bank.

The all-time high annual net profit, the highest ever CRAR of 14.85 per cent, very satisfactory PCR of 70.05 per cent, a new high of 31.49 per cent in CASA, over 90 per cent digital transactions, moderation in NPAs, etc., all indicate that economic prescription of the bank for Covid era – ‘Conserve, Consolidate and Emerge Strong’ – has provided the much-required immunity, he said.

Also read: Karnataka Bank gets additional director

The retail and mid-corporate advance, which has been the focus areas of the bank as part of its credit realignment initiative, has registered a growth of 6.34 per cent. The overall credit portfolio has seen negative growth as there was a degrowth of 53.44 per cent under the large corporate sector.

He said the ratio of retail, mid-corporate, large corporate has improved to 52.98 per cent, 33.79 per cent, 13.23 per cent as against 45.49 per cent, 28.71 per cent, 25.80 per cent as of March 2020.

“Even though we have been successful in overcoming the adverse impact of the pandemic under wave 1.0, we will continue to be ‘cautious and conservative’ in handling wave 2.0 as well, by keeping intact all our efficiency maximisation efforts,” he said.

‘Economic vaccines’

Various ‘economic vaccines’ such as restructuring, guaranteed emergency credit line, etc., being rolled out by the RBI and the Government would definitely help the needy borrowers and the banking industry alike to effectively overcome the challenges in a resilient way, he said.

Stating that the non-performing assets (NPA) have also moderated, he said the gross NPAs of the bank stood at ₹2,588.41 crore constituting 4.91 per cent as of March 31, 2021 as against ₹2,799.93 crore constituting 4.82 per cent as on March 31, 2020.

The net NPAs also moderated to ₹1,642.10 crore constituting 3.18 per cent from ₹1,755.01 crore as on March 31, 2020 constituting 3.08 per cent. Even though both the gross NPAs and net NPAs amounts have come down, the marginal increase in percentage term is mainly on account of denominator effect, he said.

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Karnataka Bank gets additional director

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Karnataka Bank Ltd has appointed Balakrishna Alse S, former Executive Director of Oriental Bank of Commerce (OBC), as Additional Director (Non-Executive, Independent) at its board meeting held on Wednesday.

During his 35 years of tenure at Corporation Bank, Alse had worked in Agriculture Policy and Lending, Credit Sanctions, Credit Risk Management, HR, Integrated Risk Management (as Chief Risk Officer) and Information / Cyber Security (as Chief Information Security Officer). He also had concurrent charge of Chief Vigilance Officer for over seven months.

In his capacity as Executive Director of OBC, he was overall-in-charge of Corporate Credit, Stressed Assets Management, Recovery, Accounts including Audit and Balance Sheet, Risk Management, Digital Banking, Cyber security, etc.

He retired as an Officer on Special Duty at Punjab National Bank (PNB), post amalgamation of OBC with PNB.

Welcoming Alse on the board, Mahabaleshwara MS, Managing Director and Chief Executive Officer of the bank, said in a press release that Alse’s experience and expertise in all facets of banking is expected to provide guidance and value addition in further enhancing the effectiveness of the board.

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This Group Company Stocks Gave Up To 1064% Return In The Last One Year

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Investment

oi-Roshni Agarwal

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In a few years time from being a mid-sized company, this family business group has surpassed the likes of Tatas, Birlas and Wadias among others to become one of the richest in India. Now, the group company is close on the heels of even overtaking Mukesh Ambani, who owns the oil to telecom conglomerate Reliance Industries.

This Group Company Stocks Gave Up To 1064% Return In The Last One Year

This Group Company Stocks Gave Up To 1064% Return In The Last One Year

Yes you are right, here we are referring to Gujarat based Adani Group of companies, with six companies listed on the Indian bourses.

The list of group’s listed entity includes Adani Transmission, Adani Total Gas, Adani Enterprises, Adani Ports and SEZ, Adani Power and Adani Green Energy.

As per the latest World’s Real time Billionaires 2021 list, while Mukesh Ambani commands a net worth of $76.6 billion, Adani is not far behind with total wealth at $69 billion.

Year to date wealth addition by Gautam Adani

On a year to date basis, Adani added almost Rs. 75 crore on an hourly basis.

Adani Group’s increasing focus on infrastructure

The success or massive wealth addition by Gautam Adani is largely the result of his increasing focus in the area of infrastructure. In the last 2 years, the company made an acquisition of Rs. 50,000 crore, while Rs. 25000 crore was in the last year alone.

Last year, Adani bought 74% stake in the Mumbai International Airport, the country’s busiest airport and also sold 20 percent holding in Adani Green to Total in another development for $2.5 billion.

Now even as the companies across India Inc. continued to bore the brunt due to the pandemic, the Adani group companies’ share price soar to even up to 11 times i, with their individual stock market cap rising manifolds.

Surge in M-cap of Adani Group companies

The Adani Group companies’ total market at around the same time last year was at Rs. 1.64 lakh crore which now has surged to more than Rs. 8.5 lakh crore, an increase of over 420 percent.

Here’s given a quick guide how the Adani Group stock prices moved over the last year:

Adani Group company Stock price on May 26, 2020 Stock price on May 26, 2021 % gains in last one year
Adani Green Energy Rs. 240 Rs. 1264 426%
Adani Transmission Rs. 178 Rs. 1392 682%
Adani Total Gas Rs. 114 Rs. 1327 1064%
Adani Ports Rs. 315 Rs. 758 140%
Adani Enterprises Rs. 140 Rs. 1322 844%
Adani Power Rs. 37 Rs. 99 167%

GoodReturns.in



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Gross NPAs of banks likely to decline in FY21 amid MSME schemes, restructuring, write-offs: CARE Ratings

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The year-on-year gross bank credit growth to MSEs in March had declined to its lowest level, amid the second Covid wave, since May in the financial year 2020-21.

Gross non-performing assets of banks are likely to decline in FY21 due to restructuring, write-offs, and resilience in the economy, rating agency CARE Ratings said on Wednesday. The decline is expected as several regulatory and government support schemes for MSMEs and others had helped borrowers to access liquidity and conserve cash flows. For instance, the moratorium on loan repayments for six months till August 30, 2020, Covid-related restructuring scheme for MSMEs till March 31, 2021, and for large corporates till December 31, 2020, Resolution Framework 2.0 scheme for personal loans and MSMEs till September 30, 2021, ECLGS to enable banks and NBFCs provide funding to MSMEs, TLTROs, special refinance facilities to NABARD/SIDBI/NHB to address sectoral credit needs, and extended partial guarantee scheme, the agency noted.

“The government had enabled loan of up to 20 per cent of an MSME’s total outstanding credit in the Rs 3 lakh crore ECLGS scheme. So, loans were guaranteed by the government and MSMEs got significant breathing space with immediate cash flows being taken care of so that they may not default and deteriorate their credit score, etc. Given that MSMEs generally have a significant share of NPAs, now that share will be much more muted than what we would have expected otherwise,” Sanjay Agarwal, Senior Director, CARE Ratings told Financial Express Online.

Gross NPAs had jumped by 43.7 per cent from Rs 7.1 lakh crore in March 2017 to reach Rs 10.2 lakh crore by the end of March 2018 following which the NPAs witnessed moderation and reached Rs 8.9 lakh crore by end of March 2020, the report said. The asset quality pressure witnessed by the banks over post asset quality review (AQR) had been reducing in a couple of years prior to Covid. The movement in gross NPA had declined to Rs 9 lakh crore in FY19 and to Rs 8.9 lakh crore in FY20.

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Despite a challenging year (FY21), the quantum of gross NPAs of scheduled commercial banks (SCBs) is expected to decline by the end of March 2021 as compared with the previous year due to write-offs, lower slippage, restructuring schemes, and ECLGS support for MSMEs, the agency said in the report. However, as anticipated with the Supreme Court judgment allowing for the recognition of NPAs, FY21-end numbers are expected to be either similar or slightly above the Q3 FY21 numbers, it added. “Slippages are largely from MSMEs in retail. MSME slippages have been reduced because of the ECLGS,” added Agarwal.

The FY21 gross NPAs is estimated to settle at Rs 7.9 lakh crore, according to CARE Ratings. While public lenders’ gross NPA amount is expected to be around Rs 6.0 lakh crore at the end of March 2021 vis-à-vis Rs 6.8 lakh crore at the end of March 2020, for private lenders, the gross NPA amount increased from Rs 1.8 lakh crore in March 2018 to over Rs 2 lakh crore in December 2019. However, it is subsequently expected to have retreated to around Rs 1.96 lakh crore by the end of March 2021.

Moreover, write-offs’ share in gross NPAs has markedly increased post FY18, indicating that SCBs have cleaned their books taking a hit and recoveries have had a smaller share of the same, the agency said. “MSMEs right off every quarter by all banks has been very significant because the government had given quite a lot of equity and banks had made a lot of provisions. Now they have written off against the provisions. So it doesn’t reflect in the profit and loss statement but writes-offs are very significant,” said Agarwal.

Importantly, the year-on-year gross bank credit growth to MSEs in March had declined to its lowest level, amid the second Covid wave, since May in the financial year 2020-21. The credit outstanding as of March 26, 2021, was Rs 11.07 lakh crore – up only 2.5 per cent from Rs 10.8 lakh crore in March 2020, according to the RBI’s monthly bulletin. Moreover, the share of MSEs in India’s overall gross bank credit also continued to decline for the third straight month. From 12.11 per cent in December 2020, the MSE share contracted to 12.09 per cent in January 2021 and 11.8 per cent in February before slipping further to 11.3 per cent in March. The overall gross bank credit as of March 26, 2021, stood at Rs 97.2 lakh crore.

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With no cushion like last time, second Covid wave poses challenges for auto lenders

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The second Covid-19 wave will have a material impact on automobile lenders’ asset quality as borrowers are grappling with reduced capacity utilisation and increased operating costs due to rising fuel cost, which would reduce their ability to service debt, says a report of India Ratings.

The impact of the first covid wave was cushioned with multiple measures that boosted optimism and recovery. However, the outcome may be different during the second wave, due to the widescale impact, including rural areas and pent-up demand being absorbed already.

Collections hit

April 2021 collections for most of the lenders remained at a decent level since the first 15 days were broadly normal across the nation. Top public sector bank State Bank of India had 95-96 per cent collection efficiency in April 2021. However, increase in localised and regional lockdowns has impacted collections of the lenders for the month of May 2021, according to industry representatives.

India Ratings estimates that the collection efficiency for the first fortnight of May could be lower by 5-7 per cent on the top of a similar decline in April over March 2021.

With reduced cash flows and rising operating cost due to fuel inflation, the excess capacity had its offsetting impact on freight contract renewals or market freight rates, all impacting borrowers’ cash flows.

Early demand indicators such as the E-way bill, diesel consumption are showing signs of moderation and asset inflation (rising prices of raw materials such as steel and cement) would impact demand offtake and thus load availability. Thus, both demand and rising operating cost would moderate borrowers’ cash flows in FY22.

Restricted mobility

Lenders’ collection efficiency would also be affected by restricted mobility as the second wave has spread across all geographies. Thus, the rating agency has a negative outlook on commercial vehicle finance as an asset class.

There are emerging trends of rising loan tenures across vehicle lenders to reduce servicing burden for borrowers. Incrementally, all vehicle segments would be impacted by the pandemic as it gets widespread, hindering business activity and thus affecting borrowers’ cash flows.

Capacity utilisation levels have been significantly affected across the heavy commercial vehicle segment. The earlier estimate of replacement demand driving lenders’ growth would take a backseat, as normalisation would be a long-drawn process with borrowers looking at increasing utilisation on existing fleet rather than purchasing new vehicles.

Lenders would be impacted in the medium term due to restricted mobility and moderating borrowers’ cash flows. Collections have become difficult due to the surge in infected cases and would impact asset quality during the first half of this fiscal, said India Ratings.

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ZipLoan partners with InCred to provide micro-loans to MSMEs

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Fntech firm ZipLoan has partnered with InCred to extend micro-loans to micro, small and medium enterprises that are unable to access financial services from traditional banking players.

“InCred and ZipLoan entered into co-lending partnership to facilitate wider and deeper reach of institutional credit in the MSME segment by leveraging each other’s strengths in terms of size, scale and technology,” the company said in a statement.

The microloans will be ranging from ₹1 lakh to ₹10 lakh with tenure upto 36 months.

Under the partnership, ZipLoan will originate and process unsecured retail business loans as per jointly created credit parameters and eligibility. InCred will have 80 per cent of the total loan on its books while the remainder will be on ZipLoan’s books.

ZipLoan will manage the loan servicing throughout the loan life cycle.

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ESAF Small Finance Bank’s operating profit up by 28% in FY21

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ESAF Small Finance Bank has recorded a 28 per cent increase in its operating profit for the year ended March 31. The figure increased from ₹324.70 crore to ₹415.84 crore despite the challenges faced during the year.

Deposits have grown by 28 per cent from ₹7,028 crore to ₹8,999 crore for the year ended March 31, 2021.

The net profit for the year ended March 31 stood at ₹105.40 crore compared to ₹190.39 crore over the same period last year. Further, the bank as a prudent measure holds provision above the RBI requirement in the standard category to the extent of ₹91 crore as of March 31, 2021.

K Paul Thomas, Managing Director and CEO of ESAF Small Finance Bank, said, “The bank has improved operating profit and total business despite the challenges posed by the pandemic. With the support of customers and their unwavering faith in us, we could also enhance our presence across the country. The reduction in the PAT was mainly due to the higher provisions during the fiscal.”

Due to a severe crisis at the grass-root level due to the pandemic, the collection efficiency was adversely impacted thereby increasing the gross NPA level at 6.70 per cent and Net NPA by 3.88 per cent, he said.

Gross advances increased by 27 per cent from ₹6,606 crore to ₹8,415 crore, while total business reached ₹17,425 crore, a growth of 26 per cent.

During the year, the bank has raised Tier I capital amounting to ₹162.59 crore by way of a private placement. As on March 31, the bank serves over 43 lakh customers through 550 branches and 308 customer service centres.

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