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Lenders are now in driving seat of troubled companies like DHFL: Chakri Lokapriya

SBI is in a strong shape but as far as Yes is concerned, DHFL deal is a positive news.

ET Now|
Jul 22, 2019, 10.59 AM IST
There is a certain amount of urgency within the lenders like SBI, Yes Bank, etc, to get the DHFL-AION Capital deal resolved, says Chakri Lokapriya, CIO & MD, TCG AMC. Excerpts from an interview with ETNOW.

DHFL is likely to announce a deal with special situations investor AION Capital for a majority stake in the housing finance company. This is something which should cheer the market.
There are a couple of things. If indeed this deal happens and comes in at the parent level, then there is a lot of inter-corporate borrowing within the group. So, some portion of it will flow down to the parent. The capital infusion, a good portion of it would come back into the company if this thing is true. Under that scenario, it is very likely that there will also be a change of ownership in the sense that if the promoter stake comes down to 10%, they will no longer call the shots on DHFL going forward.

That tells you that there is a certain amount of urgency within the lenders like SBI, Yes, etc, to get the deal resolved. Now does it help the lenders at large? SBI is anyway in a strong shape but as far as Yes is concerned, it is a positive news.

What is your perspective on HDFC Bank’s performance? It is a little surprising that analysts are still bullish on HDFC Bank irrespective of the kind of cautious commentary set by the management on the agri sector, the caution that they maintain on the NBFC space and the slowdown in the retail arm. Add to that, the big overhang of Aditya Puri’s exit and who takes over from him.
In absolute term, HDFC Bank’s results are fairly good. But on the other hand, it indicates that there is a slowdown in the corporates, in NBFCs and developers are under greater stress. If you extrapolate that to the banking financial services sector at large, it tells us that lending growth rates are likely to come down. This is in an environment for the government to increase growth rates. The slowdown is going to continue for the next couple of quarters if not more.

What is going on with Interglobe Aviation? The Jet fallout has managed to aid its numbers to a great extent. Do you think that at least in today’s trading session, the Street will be able to bypass the war between the promoters?
The results indicate that both the short-term leases of planes from Jet Airways as well as the higher ticket prices have clearly helped IndiGo. I guess what the promoter fight is telling us is that there is a kind of a disagreement over the future direction of the company. Whether it is going to remain a discount airline or turn out to be a full service airline that changes the fundamental value of the company. I would continue to stay away from IndiGo for that perspective.

NHB has asked housing finance companies to desist from financing subvention schemes. Do you think that the crunch in the real estate space is going to tighten?
Indeed. The new regulation is going to further stress the developers and in an environment where home sales have slowed down as has commercial real estate sales, this is going to make financing even more expensive. That would lead to a fallout on NBFCs as well.

Would the DHFL deal with AION Capital turn out to be a big relief for the lenders because there is not going to be any big haircut?
In terms of lenders, it will demonstrate that the lenders are now in the driving seat for these troubled companies which is a good thing, because the promoters’ control over the entity goes down, going forward and those who are infusing capital are going to be the ones to determine the future course of the company. That is a good thing for changing the growth PAT and the businesses practices of any company going forward.

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