The financial health of Vodafone Idea Ltd. is a concern for lenders, although the government is expected to find a solution to prevent the collapse of the loss-making Indian telecommunications company, according to Axis Bank Chief Executive Officer Amitabh Chaudhry.
“If this company survives, which I believe the government will try very hard to do, they will continue to make those spectrum payments and our guarantees will not be called on,” Chaudhry said in an interview with Bloomberg TV. “But it is something to worry about, we have a plan in place.”
Axis, the country’s third-largest private bank, is among lenders that have extended guarantees to Vodafone Idea, whose survival is being threatened by the government’s claim of back dues. The joint venture between Vodafone Group Plc and Indian billionaire Kumar Mangalam Birla’s conglomerate suffered a setback recently when the nation’s top court rejected petitions by telecom operators to reassess how much they owe.
“I am sure when it comes to the crunch the government will try and find ways and means to ensure this company stays for the long term,” Chaudhry said.
Separately, Chaudhry — who took charge of Axis Bank in January 2019 — wants the lender to achieve an 18% return on equity. While that’s much higher than 7.6% currently, Chaudhry hopes to achieve that goal on “transformational projects” the bank has undertaken. Axis Bank achieved a 15-16% ROE in the March quarter, which fell due to the most recent coronavirus wave.
“I am the first one to admit that it’s an aspirational target, but without those aspirations how do we become distinctive?” he said. “We want to put those aspirations, we want to share them with the market and we want to be held to those aspirations over a period time.”
The bank, which raised 100 billion rupees ($1.3 billion) in equity capital last year, wants to strike a balance between increasing lending, while being attentive to asset quality alarms.
“We are like a crouching tiger. We will capitalize on opportunity that comes our way but at the same we will prepare ourselves for any risk that comes up on our horizon,” Chaudhry said.
–With assistance from Haslinda Amin, Yvonne Man, Anand Menon and Kurien Abraham.