Kotak Bank awaits pricing cues and resolutions under IBC to start buying stressed assets

Kotak Mahindra Bank is waiting for more cues on pricing and resolution of bad loans under the Insolvency and Bankruptcy Code in order to aggressively invest in the distressed assets.

Dipak Gupta, joint managing director of the bank, said, “We have not bought very large amount of stressed assets. Out of 14 lakh crore (stressed assets), only 2.5 lakh crore are out in the first list (of the Reserve Bank of India). It is still evolving and will see how it goes, lot of laws are changing, getting modified, it has to stabilise, the pricing has to be appropriate. We are yet to see any closures…so, too early to say if pricing is appropriate but we are watching it closely.”

Kotak Mahindra group and Canadian asset manager Brookfield have also decided to jointly bid for 2,200 megawatts of power assets belonging to Jaypee Power Ventures, a unit of Jaiprakash Associates. Gupta said if Brookfield wins the bid, Kotak Bank will be the financial partner.

The Uday Kotak-led bank has been vocal about its interest in buying stressed assets but has not made much headway in the endeavour.

According to Gupta, the stressed assets space has not moved to the next stage where resolutions have started or it has moved to liquidation. This will happen in the next three months and we will then know which direction it has moved forward in, he said.

Kotak Mahindra Bank, for the October to December period, witnessed one of the slowest growth rates in the past 10 quarters, with a 19.7 percent year-on-year growth in net profit to Rs 1,053 crore.

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Gupta said the bank has been gaining more market share in the corporate segment. “It is not really incremental financing but a lot of refinancing. We have taken some recognition which, not necessarily, would be 90 days due, but slippages are at about less than Rs 300 crore,” he said.

The gross non-performing assets (NPAs) ratio of the bank was at 2.31 percent, as against 2.47 percent in the previous quarter. Net NPA ratio came in at 1.09 percent, as against 1.26 percent a quarter ago.

Among the loan accounts featured in the second list of NPAs put out by RBI, Kotak Mahindra Bank has exposure to six accounts, together worth Rs 300-400 crore. The bank has made provisions for about two-third of these assets.

On further movement of interest rates, Gupta said the two big events – the Budget and the upcoming monetary policy — will dictate direction going forward.

“There is a decent increase in the curve beyond one-year (rates). So we have seen movement in 1 to 10 years but short term hasn’t moved much and have to see how they move forward. It is generally on the way up, whether this is pause of structural reversal of direction, we have to wait and watch,” Gupta said.

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