Rajendran added that he expected the bank's earnings to improve by the second quarter next fiscal, during which time the bank may look to raise additional capital through a qualified institutional placement.
Also read: Andhra Bank Q2 net falls 78.3%, asset quality falters
Below is the transcript of the interview
Q: We understand you have received Rs 200 crore from the government from the preferential issue. Would that then complete your capital raising needs or would you now look to raise capital via other means such as QIP and is any other fund-raising on the cards for the bank?
A: This would be sufficient to maintain 8 percent tier-I capital for this year. But to grow in the next year, we need to raise capital. We will look at the other opportunities once the market improves.
Q: Things are not looking too bad actually, we have seen the Bank Nifty in particular being one of the outperforming indices in December itself and quite a bit of the public sector banks have done well. You are not contemplating a qualified institutional placement (QIP)?
A: Not immediately. Our stock price is not even 40 percent of the book value. The real potential of the share will be known once we come out of the woods, which would happen in the next two quarters. Probably the second quarter of next year is when we will target a QIP after showing results.
Q: Why are you targeting Q2 of next year? Are you giving us a view that the NPL position will not improve till then? It didn't [improve] considerably in the last quarter, I think you went down from about 4.73 percent to 5.15 -- that is a substantial erosion of asset quality, how will Q3, Q4 pan out? Are you likely to remain above 5 percent in these quarters?
A: We will continue to remain above 4-5 percent, there could be a few more additions during the current quarter but what is worrying us more is the restructured assets. 10 percent of our assets are restructured as on date and there is another Rs 3,000 crore in the pipeline for the current quarter and the next quarter. So 13 percent being the restructured assets and 5 percent being the NPA, 82 percent of our assets have to service 100 percent liabilities. It is a real challenge because this 18 percent is not going to generate any revenue immediately.
Q: What is the nature of the restructured assets and the pipeline, what does it comprise of within the Rs 3000 crore?
A: Rs 2000 crore [out of the restructured assets] are only from Andhra Pradesh power companies. There are four AP power companies that will go in for restructuring so that may happen during the current quarter itself before December 31. And there could be another Rs 1,000 crore of restructuring which could happen from various infrastructure companies. There are power-generating and power-distribution companies.
Andhra Bank stock price
On December 26, 2013, Andhra Bank closed at Rs 63.00, up Rs 0.45, or 0.72 percent. The 52-week high of the share was Rs 130.00 and the 52-week low was Rs 47.30.
The company's trailing 12-month (TTM) EPS was at Rs 16.15 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 3.9. The latest book value of the company is Rs 150.85 per share. At current value, the price-to-book value of the company is 0.42.
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