Axis Bank treats loans to Deccan Chronicle as NPAs

Says 'adequate' provisions made against these loans

Axis Bank, India’s third-largest private sector lender, says it has classified its loans to Deccan Chronicle Holdings Ltd (DCHL) as non-performing assets (NPAs). “We have made provisions proactively. We have declared (the loans to) Deccan Chronicle as NPA. We provided adequately against this exposure,” Somnath Sengupta, executive director at Axis Bank, told reporters. However, he declined to give more details.

“I cannot comment on specific accounts and discuss the details in public,” he said. It is believed the private lender has lent about Rs 400 crore to DCHL, which owns the Deccan Chronicle newspaper and the Indian Premier League cricket team Deccan Chargers.

The Hyderabad-based company has borrowed about Rs 3,200 crore from banks and financial institutions. Axis Bank’s total provision during the July-September period almost doubled from a quarter ago to Rs 509.4 core. Taking into account the current uncertain economic environment, the bank has made excess NPA provisions to the tune of Rs 115 crore.

Axis Bank held a provision coverage ratio of 80 per cent as proportion to its gross bad assets, including prudential write-offs, at the end of September 2012. The provision coverage ratio before accumulated write-offs was estimated at 90 per cent. It closed the quarter with a restructured loan portfolio of Rs 4,068 crore, representing 2.04 per cent of gross customer assets. “There is no particular trend. We continue to maintain our guidance (on restructured loans) at Rs 4,000 crore,” he said.

“While the gross and net NPAs at Rs 2,200 crore and Rs 650 crore, respectively, were lower than consensus estimates, the overall provision expenses have dramatically shot up. With restructuring during the second quarter at Rs 320 crore, the slippage number may have remained high,” said Kashyap Jhaveri, analyst with Emkay Global Financial Services, in his note to clients after the bank announced its second quarter earnings on Monday.

The brokerage firm noted that the proportion of the borrowers among the large and medium corporate with the rating of ‘A’ and above, has gone down in July-September period to 62 per cent. “Over the past four quarters, Axis Bank has seen migration of up to 11 per cent of loans from A and above rated category to lower categories,” said Jhaveri.

After market hours on Monday, the bank said its second quarter net profit increased by 22 per cent to Rs 1,124 crore, aided by higher interest and fee income, and lower expenses.