Federal Bank sells GOL offshore loans to ARCs

As per reports, two lenders have already taken the company to the court regarding outstanding on external commercial borrowings

Private sector lender Federal bank battling with high net performing assets in the last couple of quarters has sold off loans of GOL Offshore (earlier know as Great Offshore Ltd) to Asset Reconstruction Companies (ARCs).

"The account was standard in our book but we could foresee trouble brewing. And we got the right price for it, so we sold it to ARC for Rs 140 crore in the October-December quarter," said a person familiar with the development, requesting anonymity.

GOL Offshore is one of the key players in the offshore oilfield service segments in the country. The company provides drilling, offshore support services to oil and gas companies for exploration, drilling services to marine and air logistics etc. In the July-September quarter, the company had posted net loss of Rs 25.84 crore compared to a loss of Rs 12.79 crore in the same period a year ago.

The company had been in trouble regarding loan repayments earlier too. As per reports, two lenders had already taken the company to the court regarding outstanding on external commercial borrowings. Earlier a group of lenders had also formed a joint lenders forum once the loan began to show incipient signs of stress.

"I would be misrepresenting if I say there is no stress, there is, but certainly the magnitude has come down and the recoverability of the ones that have gone through is what we are now seeking to recover. ?There is one account that we have after the quarter completed our transactions in ARC for 140 crores, that will happen in Q3, the impact will be in Q3," said Shyam Srinivsasan, Managing Director & Chief Executive Officer, of Federal Bank said in the earnings analyst conference call after the second quarter results.

With stress increasing in the corporate sector the bank had seen its asset quality deteriorating in the last couple of quarters. In the quarter ended September the gross non-performing assets (NPAs), as percentage of total advances, increasing to 2.90%, compared with 2.10% in the corresponding period a year ago. However, now that the lender believes that the worst is behind them in terms of asset quality.

The banker quoted above said that now that the GOL Offshore loan has also been taken care of, the bank is not expecting any untoward surprise in terms of asset quality in the coming quarters.

Now that the cleanup of the loan book has been taken care of the bank is looking at growing its corporate loan book as it believes that the external environment is beginning to show an uptick.

It is looking at growing the corporate book by increasing the working capital finance exposure instead of aiming for large ticket size loans. Until the July-September quarter the bank had been shrinking its corporate loan book. At the end of the September quarter, corporate advances were at Rs 15,272 crore down from Rs 16, 138 crore in the corresponding quarter a year ago.