Bhushan Steel remains a standard asset: United Bank United Bank is part of the consortium of lenders to Bhushan Steel but is not a part of any additional lending to the company, said Deepak Narang, ED, United Bank of India. 1 Street Signs To safeguard our interest, banks have decided to have three directors on the board depending upon what regulations permit DEEPAK NARANG ED United Bank of India Deepak Narang, ED, United Bank of India said the bank will get the forensic audit done on Bhushan Steel and would monitor the account after the Syndicate Bank bribes-for-loan scam has came to light. Narang confirmed that United Bank is part of the consortium of lenders to Bhushan Steel but is not a part of any additional lending to the company. The company remains a ‘standard asset’ for the bank. The consortium of banks led by PNB said auditors will monitor the company’s cashflow on a daily basis and a forensic audit will be conducted. In addition to the appointment of auditors, the consortium also decided to appoint lenders independent engineer to monitor the operations of the company as well as Bhushan Steel projects that are under ramp up. According to Narang three banks would have nominees on the Bhushan Steel board. However, Bhushan Steel management is intact and bankers have confidence in the company, he said. Commenting on the bank’s performance going forward, Narang said they would be targeting for gross non-performing asset (NPA) at 9-9.25% by March 2015. Below is the transcript of Deepak Narang\s interview with Anuj Singhal and Ekta Batra on CNBC-TV18. Ekta: Starting with the Bhushan Steel issue, can you tell us if you were a part of the consortium meeting that took place yesterday and what led the lenders to decide to take the following step such as conducting a forensic audit as well as appointing audit firms etc? A: We are a part of the consortium. I attended meeting yesterday and the Punjab National Bank (PNB) gave a press release. You are right we need to monitor this account only thing is that all bankers had confidence and had lent so much of money. We will get the forensic audit done then have concurrent auditor who would look into that and three banks would have their nominee on the board. It is only to keep things under control and to have a watch on that. Company has given a presentation and all their technical staff and all their qualified personnels are in place; they are doing the work and projects are going on. So there is not much of a worry except that we need to have some safeguards. Anuj: What is interesting is that reports this morning indicate that additional Rs 6,900 crore loan was sanctioned to Bhushan Steel which is under the lens right now? Was United Bank part of this additional lending and what is the update on it? A: We are not a part of this lending. As Reserve Bank of India (RBI) has put a restriction on our lending to big corporates other than AAA, we are not a part of this lending. However for other banks yes – the requirement was assessed and they are running short of working capital and they said that unless they are given Rs 500 crore, they cannot ramp up their capacity. Additional phase III production has started, so they need additional funds. So, banks should support otherwise liquidity problem would lead to insolvency and bankers have to take care of that and provide sufficient funds for them to ramp up their capacities. And they should reach around 75 percent capacity utilisation to have positive EBITDA that is the concern. Ekta: You have touched upon working capital loans, so are the consortium of lenders as well as United Bank sanctioning working capital loans to Bhushan Steel? A: United Bank, since we have our own constraints, we are not doing it but all lenders would be taking a call on that. It is a part of cap, which is mandatory as per RBI; once a cap takes the decision that certain steps for corrective action has to be taken. So all banks need to do that and granting additional limit is a part of cap. So all banks will have to take a call and go to their board and get the sanctions. Anuj: By when will we have details on the forensic audit of the bank? A: I think there is a committee, which would look into that and they would appoint a forensic auditor following due process of whatever is required as per guidelines. The standing committee has been authorised to look into that and they would take a call on that because standing committee is a committee of small bankers which will take decision. Ekta: One of the issues that I wanted to touch upon was that reports indicated that United Bank was one of the lenders that was opposed to roping in an external management agency to run operations for Bhushan Steel, something that State Bank of India (SBI) had suggested earlier, what led the consortium to decide against it yesterday? A: We never opposed that. I think there is some misreporting. We opposed what SBI Chairman said of appointing a management agency. These decisions have to be taken in the consortium and standing committee has to look into that. When I attended yesterday, all the bankers said that they had confidence in the company because all the people are there and no one has left; there is no attrition, the technical and qualified people are still there and they gave us a presentation. So bankers have confidence and the bankers lent them about Rs 45 crore. Only Neeraj Singhal is not there and the company said that he may come back in about 8-9 days. So the management is still intact. However, to safeguard our interest, banks have decided to have three directors on the board depending upon what regulations permit. United Bank stock price On August 19, 2014, at 14:19 hrs United Bank of India was quoting at Rs 47.75, up Rs 0.40, or 0.84 percent. The 52-week high of the share was Rs 61.65 and the 52-week low was Rs 23.40. The latest book value of the company is Rs 64.81 per share. At current value, the price-to-book value of the company was 0.74. 1 2 RELATED NEWS Union Bank Q1 net profit rises 47.3% to Rs 65.89 cr Highly positive says auditor on Kingfisher siphoning funds
Posted on: Tue, 19 Aug 2014 08:57:14 +0000
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