Vikram Limaye, managing director and chief executive officer, IDFC, says the company will approach the RBI to get clarity on whether it can avail these eased norms as the company hasnit yet transitioned into a bank.
Vikram Limaye, managing director and chief executive officer, IDFC says the RBI circular on easier lending to infra companies is not applicable to the company as yet.
While the steps are positive for the sector, the company will approach the RBI to get clarity on whether it can avail these eased norms as the company hasn't yet transitioned to a bank.
"This circular is applicable only to banks and its not applicable to us because we are not a bank as yet and we need to operationalise the bank in October 2015," he adds.
Below is the verbatim transcript of the interview to CNBC-TV18
Latha: What is your sense for IDFC and when you become a bank some time in 2015 I would assume, 18 months get over by October 2015, around that time how will it work for an IDFC Bank?
A: This circular is applicable only to banks and its not applicable to us because we are not a bank as yet and our transition to bank, we need to operationalise the bank in October 2015. At the outset I would like to say this is positive in general for incentivising that into infrastructure and cost of that for infrastructure because both on cash reserve ratio (CRR), statutory liquidity ratio (SLR) and priority sector lending (PSL) side the government and Reserve Bank of India (RBI) has done its bit in terms of incentivizing the structure investment including affordable housing which is a good addition to that.
However, for us what it means is that when we become a bank in October '15; right now this is no bank, so this is part of an approval from the RBI to establish a bank and IDFC want to be promoter of that bank. All the infrastructure assets today reside in IDFC's balance sheet. When the bank gets formed and operationalise the bank will necessarily have to take over the infrastructure assets in the entire lending book from IDFC and at that point in time the assets will be taken over and liabilities will also be issued by IDFC Bank at that point in time because today there is no legal entity called IDFC Bank. So, the holders of IDFC debt will have to become holders of IDFC Bank's debt and issuance of those bonds obviously IDFC Bank will do only once we get operationalise in its part of demerger scheme of assets and liabilities from IDFC to IDFC Bank.
Therefore, at the outset I would say that this is a huge positive for us, we will seek appropriate clarification from RBI since we are in a unique position because we are not a bank as yet but we will be bank in 15 months but our interpretation of when we read the circular, what it indicates is that since the bank would be taking over the assets from IDFC under an approved scheme of RBI then the entire book becomes eligible for CRR, SLR and PSL to the extent that we have the right tenure of bonds because this is capable only to long-term bonds that are issued for financing infrastructure. So, that is our current interpretation of the guidelines when we look at it but as I said we will as part of this bank process get appropriate clarification from RBI.
IDFC stock price
On July 16, 2014, at 09:20 hrs IDFC was quoting at Rs 155.10, up Rs 5.10, or 3.40 percent. The 52-week high of the share was Rs 159.75 and the 52-week low was Rs 76.25.
The company's trailing 12-month (TTM) EPS was at Rs 11.21 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 13.84. The latest book value of the company is Rs 96.97 per share. At current value, the price-to-book value of the company is 1.60.
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