AGR verdict: SBI, IndusInd Bank slip up to 4% as banks stare at NPA pile-up

In general, the exposure of banks to the entire telecom sector ranges between 10% and 30% of their total equity with Yes Bank having the highest exposure of 29% amongst private banks

Banking stocks, including IndusInd Bank, Axis bank, and State Bank of India, tumbled at the bourses after the Supreme Court rejected Bharti Airtel and Vodafone Idea's plea seeking to neogtiate the payment schedule in the AGR case. 

Among individual stocks, IndusInd Bank hit fresh 52-week low, down 4 per cent, to Rs 1181.1 on the NSE. Besides, IDFC First Bank slipped 2.7 per cent, RBL Bank (2.3 per cent), Axis Bank (2 per cent), HDFC Bank (1.9 per cent), Federal Bank (1.4 per cent), and SBI (1.8 per cent). YES Bank, however, were trading 8 per cent higher. As for ICICI Bank, the stock slipped up to 0.8 per cent, before paring losses to trade 0.8 per cent higher.

At 11:41 am, the Nifty bank index was trading 0.72 per cent lower, as against a 0.15 per cent slip in the benchmark Nifty50 index.

According to a report by Goldman Sachs, Vodafone Idea's debt excluding deferred payment liability is around Rs 28,000 crore, with cash and cash equivalents of Rs 15,400 crore as of September 2019. This translates to a net exposure of about Rs 13,000 crore which, even though, is not substantial (or less than 2 per cent) in the context of overall non-performing loans in the entire banking system, but "would impact investor confidence and lead to higher risk aversion among banks towards telcos".

The global brokerage estimates the individual exposure to Vodafone Idea as State Bank of India (Rs 11,200 crore), IndusInd Bank (Rs 3,995 crore), IDFC First Bank (Rs 2,500 crore), ICICI Bank (Rs 1,725 crore) and Punjab National Bank (Rs 1,027.7 crore). In terms of exposure, debt given to Vodafone Idea account for 11 per cent of the IDFC First Bank's networth, and 9 per cent of the IndusInd Bank's networth, the report added.

"In general, the exposure of banks to the entire telecom sector ranges between 10 per cent and 30 per cent of their total equity with Yes Bank having the highest exposure (Rs 7,937 crore) of 29 per cent (of its equity) amongst private banks. Within the public sector banks, State Bank of India has extended debt of Rs 36,542 crore (or 16 per cent of its total equity). Now if a telco defaults on these payments, it will have impact on not just other telcos but also on the telecom infrastructure firms and the banking system," the report dated January 17 noted.

Coming down heavily on the Department of Telecommunications (DoT) for not taking coercive action against telcos for failing to repay, the apex court ordered contempt proceedings against Bharti Airtel and Vodafone Idea. The Apex Court also pulled up the DoT desk officer who wrote to the Attorney General asking him to not insist on payemnt of dues. The SC issued a contempt notice to the officer to explain why no action should be initiated against him.

The court summoned managing director, director of all telcos including Bharti Airtel, Vodafone Idea and others on March 17 to explain why these dues were not deposited despite orders and why contempt action must not be taken against them for non-compliance of order. READ MORE