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Only long-term investors are interested in infra stocks

Only long-term investors are interested in infra stocks

M Narendra, Chairman and Managing Director, Indian Overseas Bank, shares with Shashidhar Nanjundaiah the bank's experience in corporate lending and its plans to attract quality borrowing, and explains why infrastructure stocks have not performed to expectations.

How has IOB's experience been with corporate lending?  
Our experience has been satisfactory. There are occasional delinquencies, which are in tune with what has been happening in the industry.

How has IOB strategised itself around the recent demand in infrastructure sectors?
Demand from infrastructure sector has increased largely in line with Five Year Plans giving impetus to infra growth. Rapid urb­anisation in and around periphe­ral areas of urban centres is also one of the factors that contributed to the spurt in financial needs of the sector. IOB has been funding good infrastructure projects in all the infrastructue sectors.

Why haven't infrastructure stocks performed well in recent times? Are there trust issues in the market?
Infrastructure projects have long gest­ation periods and only investors with long-term perspective stay invested in this se­ctor. When the stock market mo­ves up, infras­tructure stocks also move in tandem. The issues are more on future expectations.

How do you monitor projects in MSME sectors?
We have a separate vertical that caters to MSME segment. With such a specialised approach, it is easier to monitor the project-sepcific issues and also address the sector-specific problems of a particular type of industry.

Do you believe that finance for infrastructure projects can be further facilitated?
In infrastructure lending, there are chall­enges of tying up finance with several age­ncies. For commercial banks, the limit­a­tions come in the form of ALM mismat­ches. Infrastructure bonds by banks with tax in­centives could be one of the sources of funding.

What risks do you perceive in infra-project lending?
Project delays contributed by various factors pose a major risk contributing to restructuring repayment. Delays because of approval by various agencies, land acq­uisition and funding delays affect commer­cial viability.

You happy with the way infrastructure projects are priced by banks? Is there scope for differential interest rates?
The scope of charging higher rate for infrastructure projects is very limited. There is scope for a higher rate of interest after the date of CoD when the project starts earning profits.

What are your thoughts on critical HR with technical skills that you might require among specialists in infrastructure?    
Infrastructure lending requires specia­lised appraisal and monitoring skills. The banks have created such pool of specialists in their Credit Departments and they are deputed to specialised training programmes for updating the skills. The skill-sets of the officers get improved as they handle more infrastructure projects in the bank.

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