State-run Punjab National Bank (PNB) is aiming to recover money from 2-3 National Company Law Tribunal (NCLT) accounts in the second quarter.
In an exclusive interview to CNBC-TV18, Sunil Mehta, managing director and chief executive officer, said that Punjab National Bank has made provisions worth 63 percent for Nirav Modi's assets and remaining will be completed in the third quarter.
Watch: Bandhan Bank in race to acquire PNB Housing Finance
According to Mehta, Essar and Bhushan Power accounts will give Punjab National Bank reduction in non-performing assets (NPAs) to the level of Rs 5,000 crore.
Edited excerpts: Q: First up, PNB Housing, is tomorrow the last date and can you at least tell us how many bidders have come in so far?
A: PNB Housing dates, I have not taken update right now from my bankers, but I have just found that good number of interest is still available. The media is already covering a lot number of interests that is expressed.
Q: Is Bandhan Bank a bidder, would you know?
A: Yes, Bandhan Bank I understand that they are also bidding.
Q: How many bidders so far, is it 12, just every private equity name is there?
A: I have not taken a recent update. I will get back to you when I get an update.
Q: I just wanted to know about the sale of your head office as well. Is that being contemplated very seriously and what is the valuation you have received so far, when may a deal be done?
A: Last November, we have shifted to a very large corporate office having 8 lakh square feet area in Dwarka. So the old headquarters definitely is now redundant, Bhikaji Cama. So that building, we are not using right now, so, if need be, we may monetise it. So, we are just exploring the options and negotiations are already going on with few government agencies.
Q: So we should expect it to be done in the calendar 2018?
A: Yes, obviously.
Q: You just said that Bandhan Bank is one of the bidders for PNB Housing. Just wanted to understand the expression of interest (EoI), most of it will be filed I understand later this week, but by when will the entire process get over. How long will it take for the sale to be completed?
A: The process is already on and we expect this to be completed by the end of Q3.
Q: What is your exposure in the first list of National Company Law Tribunal (NCLT) companies? Did you get any money; I am sure you must have received some money from Bhushan Steel?
A: Yes of course. Out of the first list of 12 accounts, we had exposure in nine accounts aggregating roughly Rs 12,000 crore. Out of which, two accounts we already have received the money in Q1 and two-three accounts, we are expecting to get the money in Q2.
Q: How much is your exposure to Essar and how much is your exposure to Bhushan Power; those are the two things which are looking like resolving?
A: It will not be fair if I discuss individual accounts, but I can say fairly these two accounts will aggregately give me reduction in my non-performing loan (NPL) to the level of Rs 5,000 crore.
Q: Reduction in NPL, yes, but Essar I think will also give you a P&L gain, the way bids are going on. You will get some P&L gain, right?
A: We are expecting it, but the deal is yet to be finalised. However, we are expecting a gain on this.
Q: You were to make about Rs 7,200 crore of provisions related to the Nirav Modi case in Q1. You made about Rs 1,900 crore. How much more will you make in the coming quarters and what will that do to your credit cost?
A: We have already made 63 percent of the provisioning requirement. We are much ahead of the curve in this matter. The remaining provisioning we will be able to complete in the Q3 quarter and we are already geared up for it.
Q: Q3 quarter you said, so, your Rs 5,300 crore are left, right, to provide in that account?
Q: You will take it in Q2 and Q3, you will divide it into the two quarters?
A: Q2 and Q3, yes.
Q: If you can talk about the other stress, aside from the well-known Nirav Modi thing, what has been the rate of fresh slippage creation and are you seeing it substantially lower in the current quarter, the second quarter, already two third of the quarter is over?
A: You will appreciate that during the Q1 itself, my operating profit has gone up by 30 percent. So it was in the range of Rs 3,000 crore in Q1 of 2017, it is more than Rs 4,000 crore in Q1 of 2014. So my operating profit has substantially gone up. We are ramping up.
If you take off the impact of this one-off incident of Nirav, then my profitability has gone up three times during the first quarter itself, because as you rightly said in the beginning, we have already made a provision of more than Rs 1,800 crore, by Q1 2017 profit was only Rs 300 crore. If you take out this one-off incident, my profitability on Q1 would have been Rs 900 crore. So it means the fundamentals of the bank and the entire processes are on track and we are in a bouncing back mode.
We have made a recovery of Rs 8,445 crore during the first quarter as against the last full year recovery of Rs 5,617 crore. So that shows that bank is now totally geared up and planned to bounce back from the situation.
Q: Will your credit cost move up higher in the quarters to come because of the amount of provisions you have to make with respect to the Nirav Modi case? Last quarter your credit cost came in at about 3 percent or so which was the highest in the last five quarters. Should we expect more pressure there?
A: We are expecting a reduction in credit cost, because the first quarter, if you see my fresh slippages, the fresh slippages were lower than the slippages of Q1 2017. So that way, our monitoring systems which we have created, a special assets monitoring vertical, that vertical which we have created in month of June has started yielding good results. We hope substantial reduction in slippages during the current quarter itself and throughout the year as well.
Q: You have investments in UTI Mutual Fund as well. That is a substantial 18.2 percent. Would you consider selling it off to someone else, say for instance SBI, there was news that they are looking to consolidate holdings of others in UTI. Is that a thought?
A: Right now, this not a proposal. Right now, we are thinking to go for price discovery through listing. All the participants may participate proportionately. So, there is no plan of selling of our stake to any of the other partner.
A: That is still in pipeline, it is work in progress.
Q: When is that coming up?