Volume growth in watches may remain slow in Q4: Titan

In Q4, we expect diamond studded sales to be more than 22 percent that we saw in the last quarter
S Subramaniam
CFO
Titan
Titan Industries ‘ volumes in the watch business rose a weak 4 percent in Oct-Dec and growth in the fourth quarter could be similar, CFO S Subramaniam, said on Thursday.

Last quarter, the Bangalore-based company’s diamond jewellery sales were also low as more people opt for gold during the festive period of Dassera and Diwali. Subramaniam expects the diamond jewellery sales to be “significantly” more than the 22 percent growth it saw in the third quarter, helped by the discount scheme it runs in Jan.

Titan on Wednesday reported a 24 percent year-on-year rise in third quarter net profit at Rs 204 crore. Its revenue for the three-month period was up 23 percent to Rs 2,983 crore.

Analysts on average were expecting Titan to report a net profit of Rs 205 crore on revenue of Rs Rs 2,910 crore, according to a CNBC-TV18 poll.

While the festive season did bring in more customers, Subramaniam noted that much of the growth was driven by new store openings and demand as such remained sluggish.

Investment bank Goldman Sachs said that it remains positive on Titan’s ability to create brands and expand its retail footprint.

However, it maintained a “neutral” rating on the stock, saying current valuation adequately reflected that potential.

Also Read: Suzlon jumps 8% on arm REpower’s largest ever order win

Below is S Subramaniam’s interview on CNBC-TV18

Q: The disappointment is in the share of diamond studded jewellery in the current quarter. Can you explain what happened and whether you see this as a trend going forward?

A: Diamond studded jewellery in this quarter is low because this is a season where people buyPlaingold. Diwali season, festival season along with wedding season, a lot of plain gold jewellery is purchased. It is also our largest selling quarter. Therefore, the ratio of plain gold jewellery to diamond studded jewellery will be high.

We did have a fair dip in this quarter for reasons which we are still not very clear about, but are hoping that things would get better. Let’s also not forget that in Q2, we run Diamond Activation.

We had significant sales and a 32 percent share last quarter and for Q4, we would have one more activation. Therefore, we expect diamond studded sales to be more than 22 percent that we saw in the last quarter. It is a seasonal impact. Overall, this year we should be 26-27 percent atleast, if not more for the year.

Q: Sales growth and retail volumes were a bit subdued in the current quarter. Are you facing any pressure or sluggishness in the consumer segments? Can you give us some trends on how January has been?

A: 10 percent growth, there is sluggish demand, while in the overall quarter we did 27 percent, a lot of that has come from new stores, so the demand is still muted. I don’t think the economy has recovered.

People are not walking into stores in droves. The festive season did bring in a lot more walk-ins and fortunately the good pattern, we have seen is that post Diwali there hasn’t been a major slump that we witnessed last year and that’s a good sign. January is also not so bad.

It is more cautious. People are cautious about investing in gold, but it is still sometime away from a large growth that we are going to see.

See recovery in power sector order from H2FY14: Rel Infra

As far as CERC and SERCs are concerned, they must be totally free to fix the tariffs depending on what is necessary and what is actually the rate of return for various developers
K Ravi Kumar
Independent Director
Reliance Infra
KRavi Kumar, Independent Director of Reliance Infra told CNBC-TV18 regulatory bodies like the Central Electricity Regulatory Commission (CERC) should be free to fix tariffs. He also advocated the need to place mechanisms that will ensure reduction of Aggregate Technical and Commercial (AT&C) losses.

Kumar emphasised on the need to ensure free flow of power across grids. He believes distribution lines should be strengthened to lower transmission and distribution loss. Besides, he is also in favour of a single national grid for transmitting power across regions.

Moreover, Kumar stressed on the requirement for single window clearance model adopted for ultra modern power projects. Going forward, he sees recovery in power sector orders in the second half of fiscal year 2014 onwards and expects some margin pressures continuing for BHEL .

Here is the edited transcript of the interview on CNBC-TV18.

Q: Part of the power sector problems are with the Central Electricity Regulatory Commission (CERC) that is a regulatory body, part of them are perhaps impacted by environmental related issues and some of which could even be in the courts. So what exactly can the CCI resolve? If you have to order their agenda for the power sector, what will be the first two problems that you will put on their plate?

A: One thing is that the regulatory bodies must be free from political interference. That is not only CERC, the State Electricity Regulatory Commissions (SERCs) are also there. The SERC is independent of what is going on in the centre.

So as far as CERC and SERCs are concerned, they must be totally free to fix the tariffs depending on what is necessary and what is actually the rate of return for various developers, whether it is the state generating stations or central generating stations like National Thermal Power Corporation (NTPC) or it is private developers independent power producer (IPP) and all that.

If the electricity sector has to grow, they must be compensated by real tariff which is not too bad for consumers and at the same time, it is fair to both consumer as well as the generating companies. That is one thing which is necessary. Second thing is there is a lot of shortage in south and the rates are quite high. The merchant rates in the south are very high.

Whereas if you see in the western, eastern or in the northern region, it is around Rs 3.5 which will not compensate the IPPs to put up new plants or will not allow new IPPs to come up for the existing developers. So there is a need for rationalization and there must be enough corridors for transmitting power from north to south. The SERCs and CERCs must be independent, the regulators must be independent and there must be a regular tariff revision. Last year, there was good tariff revision and this financial year was one of the best years. There was a rise in tariffs almost everywhere.

Second is Aggregate Technical and Commercial (AT&C) losses. Competition is also very difficult and AT&C losses should be brought down to at least 12 percent in the country. It is quite high today, around 30 percent and in some places it is around 55 percent.

Q: Isn’t that because there is wholesale pilferage at the state level and if it is not pilferage, then it is actually blessed by state level politicians? Can a cabinet committee of ministers really do much about these kinds of transmission and distribution (T&D) losses? May be some high-tension wires were recommended long back by Suresh Prabhu’s ministry and that requires a whole lot of investment. What can they do about T&D losses?

A: Actually there must be separate feeders for agriculture and also other feeders and a meeting should be done electronically. In foreign countries, if you look at US or Europe, the pilferage is almost nil. Of course attitude of the people have to change but, definitely there must be some mechanism. One is tariff hike and recently the power ministry has told tariff hike is the last solution.

So definitely, there is necessity to reduce AT&C losses and also ensure tariff hikes. This is one thing that is necessary and there must be free flow of electricity from all grids and there must be a national grid so that a developer in the north should be able to pump electricity to the south.

Expect order book to continue over Rs 10,000 cr: KEC Intl

This year, growth has been very satisfying and we have grown at 23 percent. Overall, if you look at the order mix, we have tremendous amount of orders from Power Grid Corporation of India Limited.
Ramesh Chandak
MD
KEC Intl
KEC International declared their third quarter results. According to the press lease their net sales were up 23 percent and the order book has crossed Rs 10,000 crores. Profits stood at Rs 29 crore, excluding a Rs 43 crore gain from land sale which was last year. So profits stood at Rs 29 crore against Rs 37 crore but last year the profit got boosted.

In an interview to CNBC-TV18, Ramesh Chandak, managing director, KEC International said their cable business did not do well but for their core business of transmission there was no drop in margins which stood at 8.7 to 9 percent.

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He further said, they have a good order base of Rs 10,000 crores and the Power Grid Corporation of India Limited (PGCIL) order book now stands at over 30 percent as against 15-16 percent earlier.

He expects momentum of order inflow to continue. “We expect our order book to continue at more than Rs 10,000 crore levels, in spite of our execution going up,” he asserted.

Below is the edited transcript of his interview on CNBC-TV18

Q: Can you take us through what else impacted the profit, Rs 29 crore would be a tad disappointing and what is the margin picture?

A: You are right that the margin at Rs 29 crore looks very low in relation to Rs 37 crore, on a smaller turnover. One of the main reasons is that we had some new profit centers established like power system, cable, telecom, railway, water and because we have taken many orders for the prequalification purpose. Two, the cable business which is an established business of ours did not do well because cable market currently is under tremendous stress. However our core business of transmission, the margins are still at 8.7-9 percent. So there is no drop in our regular core business.

The new businesses are almost striking a breakeven level and probably this will get corrected in two quarters time. After that we are seeing that going forward, margins will be better. It is good that we have created order base of Rs 10,000 crore, which will help us to grow even in the next year.

This year, growth has been very satisfying and we have grown at 23 percent. Overall, if you look at the order mix, we have tremendous amount of orders from Power Grid Corporation of India Limited (PGCIL). The PGCIL order book itself is now over 30 percent which used to be 15-16 percent earlier.

Q: What is the blended margin this time?

A: It is only 6.1 percent.

Q: Can you throw some light on the other income which has fallen to Rs 7 crore versus Rs 57 crore on a year-on-year (YoY) basis?

A: Yes, it is because of the land sale. Entire difference is only land sale

Q: Can you throw some light with regards to the finance cost also for the company which has risen on a YoY basis by 27 percent, what is the average run rate that we could expect in terms of finance cost for the company?

A: If you look at the finance cost in terms of percentage of sales, it is same. Last time it was 2.9 percent, this time as well it is 2.9 percent. Since, we are an infrastructure company; our large borrowing is the working capital, which increases in line with the turnover. So, if there is a growth in turnover, there is a growth in finance cost at the same rate. There is not a single difference in that.

In fact in our working capital interest has been lower because this year, we have taken the loan for our cable plant of almost Rs 150 crore and that interest has also started hitting our balance sheet. In spite of that, our interest to sales ratio is still the same.

Q: Most of your orders have been from the transmission sector up till now, can you just detail what sort of order inflow can we expect going forward for you?

A: We are seeing the momentum continuing. Today, we have Rs 10,000 crore order book, in spite of our execution going up by 30 percent. So, our order intake has been quite substantial. We expect our order book to continue at more than Rs 10,000 crore level, in spite of our execution going up.

Expect loan growth of around 20% by March: Dena bank

Slippage in December quarter was about Rs 238 crore and we don’t have any major account slipping. So slippage should be slightly lesser than what it has been in December
Ashwani Kumar
CMD
Dena Bank
Dena Bank reported a net profit of 10.55 percent year-on-year to Rs 206.4 crore in the third quarter of financial year 2012-13 with a rise in net interest income (NII) by 13.6 percent to Rs 615 crore from Rs 541.2 crore during the same period. “We have total restructured book of Rs 4,800 crore out of which Rs 2,036 crore is of state electricity boards, which is government guaranteed, so, 43 percent of our portfolio is government guaranteed,” said Ashwani Kumar, CMD, Dena Bank in an interview to CNBC-TV18.

Kumar further added that a total restructuring pipeline of Rs 170-200 crore is expected along with a loan growth of around 20 percent by March.

Below is an edited transcript of Ashwani Kumar’s interview on CNBC-TV18

Q: How is the asset quality for Dena Bank this time around? How did you do on the slippages as well as the restructured pipeline?

A: Regarding asset quality, though there has been some slippage, yet we have been able to maintain the asset quality and our gross non-performing asset (NPA) stand at 2.09 percent, so a marginal increase from previous quarter figures, but on the whole the asset quality is under control.

In case of restructured book, we have total restructured book of Rs 4,800 crore out of which Rs 2,036 crore is of state electricity boards, which is government guaranteed. So, roughly 43 percent of our portfolio is government guaranteed.

During December quarter, there was a restructuring of Rs 263 crore and very minor slippage of the restructured portfolio about Rs 43 crore that is 0.95 percent. Asset quality wise, we are maintaining a very strict visual on slippages. Accounts are being monitored on a daily basis. Accounts above Rs 10 crore are monitored at the apex level on daily basis, so slippages are under control.

Q: What is the exact slippage in Q3 and what would you expect from Q4 and the next quarter? Would they be lower than the slippage, fresh slippage in the Q3?

A: Slippage in December quarter was about Rs 238 crore and we don’t have any major account slipping. So slippage should be slightly lesser than what it has been in December.

Govt to come out with modified DTC Bill: Shome

The government will come up with a modified Direct Taxes Code (DTC) Bill after incorporating the suggestions of the Standing Committee on Finance, which among things had suggested raising annual income tax exemption limit to Rs 3 lakh.

“Will come out with modified DTC (Bill) in response to Standing Committee suggestions,” said Advisor to the Finance Minister Parthasarathi Shome at a FICCI event here. He said the Finance Ministry is looking at the Bill and working on tax structures as suggested by the Parliamentary committee.

The Parliamentary panel headed by senior BJP leader Yashwant Sinha in its report (March 2012) had suggested raising the annual income exemption tax limit to Rs 3 lakh as against Rs 2 lakh proposed in the original DTC Bill. Current tax exemption limit is Rs 1.8 lakh. It has also suggested that subsequent tax slabs be adjusted accordingly to provide relief to people reeling under the impact of inflation. The DTC will eventually replace the over five decades old Income Tax Act.

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“We are trying to see what could be the best in terms of transparency so that issues that are hurting industry could be covered adequately,” Shome said. He further said the Finance Ministry is also addressing the issue of expenditure control and that remains a major challenge. “We are looking into expenditure efficiency. We should do more in terms of efficiency. Issues on expenditure side is being addressed. Expenditure control is a major challenge and is being addressed by the Finance Minister,” he said.

The government will come up with a modified Direct Taxes Code (DTC) Bill after incorporating the suggestions of the Standing Committee on Finance, which among things had suggested raising annual income tax exemption limit to Rs 3 lakh.

“Will come out with modified DTC (Bill) in response to Standing Committee suggestions,” said Advisor to the Finance Minister Parthasarathi Shome at a FICCI event here. He said the Finance Ministry is looking at the Bill and working on tax structures as suggested by the Parliamentary committee.

The Parliamentary panel headed by senior BJP leader Yashwant Sinha in its report (March 2012) had suggested raising the annual income exemption tax limit to Rs 3 lakh as against Rs 2 lakh proposed in the original DTC Bill. Current tax exemption limit is Rs 1.8 lakh. It has also suggested that subsequent tax slabs be adjusted accordingly to provide relief to people reeling under the impact of inflation. The DTC will eventually replace the over five decades old Income Tax Act.

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“We are trying to see what could be the best in terms of transparency so that issues that are hurting industry could be covered adequately,” Shome said. He further said the Finance Ministry is also addressing the issue of expenditure control and that remains a major challenge. “We are looking into expenditure efficiency. We should do more in terms of efficiency. Issues on expenditure side is being addressed. Expenditure control is a major challenge and is being addressed by the Finance Minister,” he said.

No proposal from ArcelorMittal for more stakes: Uttam Galva

Uttam Galva Steels today said it has not received any proposal from ArcelorMittal for acquiring additional stake in the company.

“…there is no such proposal by ArcelorMittal Group to acquire any further stake/shares in Uttam Galva Steels,” the Mumbai-based firm said in a BSE filing.

ArcelorMittal, now a co-promoter of the Mumbai-based galvanised steel maker Uttam Galva, has 33.80 percent stake in the company as on December-end. The Miglani family, the original promoter, has 37 percent holding.

Unconfirmed reports had said that the world’s largest steel maker ArcelorMittal was planning to buy out the Miglani family’s entire stake in the firm.

Following the reports, shares of Uttam Galva Steel had initially risen by 16 percent on the BSE. However, it is trading at Rs 114.90 in the afternoon session, 5.63 percent lower over the previous close.

Uttam Galva Steels, according to its website, has three galvanising lines with a total capacity of 3.5 lakh tonnes per year. It has its own cold rolling facility with a capacity of five lakh tonnes per annum.

More than 70 percent of the company’s products are exported to over 100 countries.

India, now the world’s fourth largest steel producer with an installed capacity of 90 million tonnes per annum, aims to increase capacity to 200 mtpa by 2020.

Govt revises downwards FY12 GDP to 6.2% from 6.5%

Government today revised downward the economic growth for fiscal 2011-12 to 6.2 per cent from the earlier estimate of 6.5 per cent.
However, as per the first revised estimates of National Income, Consumption Expenditure, Saving and Capital Formation, the GDP (Gross Domestic Product) for the fiscal 2010-11 has been revised upwards to 9.3 per cent from 8.4 per cent.

“GDP at factor cost at constant (2004-05) prices in 2011-12 is estimated at Rs 52,43,582 crore as against Rs 49,37,006 crore in 2010-11, registering a growth of 6.2 per cent during the year as against a growth of 9.3 per cent in
the year 2010-11,” the estimates showed.

RBI lowers current fiscal growth projection to 5.5%

The estimates were released by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation for 2011-12, along with second revised estimates for the year 2010-11 and third revised estimates for 2009-10.

At current prices, CSO said, GDP in 2011-12 is estimated at Rs 83,53,495 crore as against Rs 72,66,967 crore in 2010-11, showing an increase of 15 per cent, as against an increase of 19 per cent in the previous fiscal.

The CSO said that the per capita income in real terms (at 2004-05 prices), is estimated at Rs 38,037 for 2011-12 as against Rs 36,342 in 2010-11, registering an increase of 4.7 per cent during the year, as against an increase of 7.2 per cent during the previous year.

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The per capita income at current prices is estimated at Rs 61,564 in 2011-12 as against Rs 54,151 for the previous year depicting a growth of 13.7 per cent, as against an increase of 17.1 per cent during the previous year.

The data further further said that the growth in the GDP during 2011-12 has been achieved due to expansion in financing, insurance, real estate and business services (11.7 per cent), transport, storage and communication (8.4 per cent), electricity, gas and water supply (6.5 per cent) and trade, hotels and restaurants (6.2 per cent).

On the Gross Domestic Saving (GDS) front, the growth at current prices in 2011-12 slowed to 30.8 per cent of GDP at market prices as against 34 per cent in the previous year.

The GDS is estimated at Rs 27,65,291 during last fiscal crore as against Rs 26,51,934 crore in 2010-11.

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The slower growth in GDS has mainly been due to decline in financial savings of household sector from 10.4 per cent to 8 per cent, private corporate sector from 7.9 per cent to 7.2 per cent and that of public sector from 2.6 per cent to 1.3 per cent in 2011-12 as compared to 2010-11.

At constant (2004-05) prices, the Gross National Income (GNI) at factor cost in 2011-12 is estimated at Rs 51,96,848 crore as against Rs 48,82,249 crore in 2010-11, showing a rise of 6.4 per cent during the year, the CSO said. The increase was 8.8 per cent in the previous year, .

At current prices, the GNI in 2011-12 is estimated at Rs 82,76,665 crore as compared to Rs 71,85,160 crore in 2010-11, showing a rise of 15.2 per cent as against an increase of 18.4 per cent in the previous year.

In absolute terms, CSO said, the saving of the household sector has increased from Rs 18,32,901 crore in 2010-11 to Rs 20,03,720 crore in 2011-12, increasing by 9.3 per cent. The saving of private corporate sector has gone up by 4.1 per cent from Rs 6,19,370 crore in 2010-11 to Rs 6,44,473 crore in 2011-12.

On the other hand, saving of public sector has gone down by 41.4 per cent from Rs 1,99,662 crore in 2010-11 to Rs 1,17,097 crore in 2011-12.

The Gross Domestic Capital Formation has increased from Rs 28,71,649 crore in 2010-11 to Rs 31,41,465 crore in 2011-12 at current prices and it increased from Rs 21,20,377 crore 2010-11 to Rs 21,31,839 crore in 2011-12 at constant (2004-05) prices.

The rate of growth of Gross Capital Formation at current prices stood at 35 per cent in 2011-12 as against 36.8 per cent in 2010-11. The rate of growth of Gross Capital Formation at constant (2004-05) prices is 37.9 per cent in 2011-12 as against 40.0 per cent in 2010-11.

The data further revealed that at constant prices, the primary sector, i.e. agriculture, forestry & fishing has shown a growth of 3.6 per cent during 2011-12 as against 7.9 per cent during the year 2010-11.

The growth of secondary sector is 3.5 per cent and that of service sector is 8.2 per cent during 2011-12, as against a growth of 9.2 per cent and 9.8 per cent, respectively, in the previous year.

The CSO said that the first revised estimates for the year 2011-12 (earlier called Quick Estimates) have been compiled using industry-wise/institution-wise detailed information instead of the benchmark indicator method.

ICICI Bank Q3 profit rises 30% on higher NII & other income

India’s largest private sector lender ICICI Bank ‘s third quarter (October-December) standalone net profit jumped more than 30% year-on-year to Rs 2,250 crore, driven by robust net interest income, which increased 29% to Rs 3,500 crore. Other income too climbed 17% to Rs 2,215 crore adding to the profit margin.

“The rise in profit came on the back of growth and efficiency parameters,” Chanda Kochhar, MD & CEO, ICICI Bank told reporters in a conference call.

“Going forward, we expect slight improvement in net interest margin by a few basis points. Our growth in loans is well-balanced. We would grow our retail loans at 20%. Also, there is a room for growing our international business wherein the net interest margin stood at 1.3%,” she said.

Analysts on an average were expecting profit after tax at Rs 2,077 crore and net interest income at Rs 3,499 crore for the quarter.

The bank expanded its loans by 16% y-o-y to Rs 2.87 lakh crore while the deposits grew at a slower pace by about 10% to Rs 2.86 lakh crore.

The share of current and savings account (CASA) was at 40.9% as against 40.7% in the second quarter. CASA is a source of cheap funds for banks. Net interest margin logged a rise of 37 basis points to 3.07% y-o-y.

Provisions against bad loans inched up to Rs 369 as against Rs 341 crore a year back. However, the same came down in comparison with the July-September quarter recorded at Rs 508 crore. Provision coverage ratio stood at 77.7% as on December 31.

“In Q2 provisions were up due to one single corporate account which we had provided for. Earlier, we had sold our credit exposure in Kingfisher airlines. Currently, we do not have any plan for selling our (stressed) loan portfolios,” Kochhar said.

During the quarter, the gross non-performing asset (NPA) ratio improved from 3.54% to 3.31% quarter-on-quarter. Net NPA ratio was at 0.76% compared with 0.78% a quarter back. Net restructured book remained at Rs 4,169 crore, little changed from the previous quarter.

ICICI Bank, according to Kochhar, does not need to raise any equity capital in the near term. Its capital adequacy ratio was 19.53% of which tier-I (equity capital) was at 13.25% as on December 31.

At 14.40 hrs, ICICI Bank shares were trading at Rs 1,196, down more than 1% on NSE. Earlier in the trading session however, those hit 52-week high of Rs 1,232 before the results announcement.

“There were high hopes of better-than-expected results. Some traders were speculating on that. Though, the bank has reported good set of numbers but there is nothing to cheer about it. Some amount of profit booking has led to the fall in share price,” said a banking analyst from a foreign brokerage firm.

Ahead of industry in realising bad assets: SBI

With the Reserve Bank of India cutting policy rate, institutions are expected pass on this benefit to consumers by offering better rate of interest on loans. Banks are willing to tweak their loan rates and borrowers may find a case for transmission which in turn will boost economic activity, say bankers while speaking to the press on Tuesday.

SBI chairman Pratip Chaudhuri speaking to CNBC-TV18 hinted that customers could expect a base rate cut , reduction in some spreads or maybe a combination of both.

Given the surplus cash this state run lender holds, the impact reducing interest rate would be margin neutral.

“We would benefit by about Rs 250 crore per annum on account of cash reserve ratio (CRR) cut and Rs 50 crore per annum from the repo rate cut. As long as the benefit that we pass on is well within the Rs 300 crore, it would not have a detrimental impact on the margins,” he elaborated.

SBI’s current loan growth stands at around 17 percent (Y-o-Y) and the bank is hopeful surpassing it by FY13 end.

Further, he added that the bank is much ahead of industry when it comes to realising assets. “In our case the NPL scene has largely played out in the first and second quarter and we generally recognise the problems early. The third quarter number seems to be much better than that,” he added.

Below is the edited transcript of Pratip Chaudhuri’s interview with CNBC-TV18.

Q: What are banks likely to do, do you think that there is a base rate cut coming and do you think that it will be 25 bps or will it be more sectoral according to you?

A: Our asset liability committee will meet late today evening because we want to have all the data and based on that data we would take a decision. It could be base rate cut; it could be a cut in some spreads or maybe a combination of both.

Q: Extending that point forward because you already have surplus cash so you can cut deposit rates quite easily but will you give lesser cuts for your borrowers. What exactly will the impact be on the net margins of the bank itself?

A: It would be margin neutral because our back of the envelope calculation reveals that we benefit by about Rs 250 crore per annum on account of cash reserve ratio (CRR) cut and Rs 50 crore per annum on account of the repo rate cut. So, totally it adds up to Rs 300 crore. As long as the benefit that we pass on is well within the Rs 300 crore, it would not have a detrimental impact on the margins.

We still have some excess cash, but what we have seen in the last few weeks is a flight of deposits to the tax free bonds, liquid funds and income funds of mutual funds. So that has what has somewhat reduced our excess liquidity.

Yesterday, Reserve Bank of India (RBI) opened up the marginal standing facility (MSF) at 8.75, which is a huge positive. The Governor gave a clear assurance that there is no stigma attached to drawing under the MSF facility. So, therefore in terms of liquidity we seem to be quite comfortable.

Q: There is a lot which has been spoken about with regards to credit growth and it is not matching up with regards to what the RBI had put out in terms of an estimate for FY13. Can you throw some light with regards to your loan growth year to date and how much do you think that you are going to end the year in terms of loan growth totally for FY13?

A: Currently our year on year loan growth is running at about close to 17 percent. We have seen a huge surge in the month of December and particularly January. The interest gets applied on the last day of the month, so 31st being the last day; we expect a surge in the loan volumes.

Q: Can we assume that you will do 17 percent by FY13 or year end as well?

A: Looks quite likely. We could be surpassing that as well.

Q: One public sector undertaking (PSU) banker told me yesterday, he is seeing a new wave of non-performing loans (NPL) or restructuring in the midcap and the small and medium enterprises (SME) space. Is that true?

A: In our case the NPL scene has largely played out in the first and second quarter and we generally recognise the problems early. So, whatever we have seen in first and second quarter, the third quarter number seems to be much better than that. We are generally slightly ahead of the industry in identifying and declaring the problem. We have not seen any particular surge in the third quarter as such.

Q: In the last round of slowdown, from 1998 to 2003, the banks did not even have the law; there was no Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) to recover. Now you have a law to recover bad assets, still so much restructuring and so little recovery?

A: Look at it globally; the three major auto companies of the world, did the bank close in and sell off their assets. An orderly restructuring when you allow the companies to reorganise their liabilities is at the end of the day a much better deal for the banks and for loan lenders.

Even if you look at the Chapter XI bankruptcy code of US, which is largely followed in most other parts of the world, every opportunity is given to all the creditors be secured or unsecured to come together and look at a possibility of a restructuring or reorganising the liabilities.

If you close in and selloff the asset generally, the recovery thereof is much worse and even if you try for the change of management or selling of the company, we have realised much better value if it is a running company. Therefore, closing down the company, forcing into the auction is always the least preferred and is resorted to only when all other options have been exhausted.

HDFC Bank cuts auto loan rates by upto 0.5%

Taking a cue from RBI’s rate cut yesterday, private sectorHDFC Bank has decided to slash auto loan rates by upto 0.5 per cent.

The interest rate on car loan will be lower by 0.25 per cent while two-wheeler loan will be cheaper by 0.5 per cent, a senior bank official confirmed when contacted.

As far as the commercial vehicle segment is concerned, the reduction in rates will be 0.25 per cent. The new rates would be effective from February 1, the
official added.

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Last month, the bank had reduced its base rate by 0.1 per cent to 9.7 per cent, the lowest in the market. At the same time, the benchmark prime lending rate (BPLR) of the bank was also slashed by a similar margin to 18.20 per cent.

The revision in the benchmark lending rate was in anticipation of rate cut by the central bank in its January policy.

Yesterday, the RBI decided to reduce short-term lending rate by 0.25 per cent and slash Cash Reserve Bank (CRR) by same margin to inject Rs 18,000 crore of liquidity into the system.

Following the announcement by RBI, IDBI Bank reduced both its deposit and lending rates by 0.25 per cent while other banks including State Bank of India (SBI) hinted at cutting their interest rates within next few days.

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The Mumbai-based HDFC Bank currently offers car loans between 10.75 per cent and 11.75 per cent. Post rate cut, the range would be 10.5-11.5 per cent for repayment period between 36 and 60 months.

Accordingly, interest rate on two-wheeler loans would be adjusted to between 19.25 per cent to 22.25 per cent. With regard to commercial vehicles, the rate on heavy commercial vehicle will be down by 0.25 per cent to 11 per cent while light commercial vehicle will get reduced to 13.75 per cent from existing 14 per cent.

The auto loan portfolio of the bank currently stands at about Rs 33,000 crore. The auto loan advances of the bank has been witnessing a growth of 12 per cent.