Punjab National Bank (PNB), which saw the highest net loss by any bank in a quarter at Rs 134 billion during January-March, believes the insolvency resolution at Bhushan Steel will have a positive impact on profits to the tune of Rs 7.35 billion in the June quarter.
Also, it hopes bad debts will fall by Rs 38.57 billion after the acquisition of Bhushan by Bamnipal Steel (BNPL), a wholly-owned subsidiary of Tata Steel. While the bank will recover Rs 30.5 billion of the dues, it will also be able to write off Rs 8.07 billion from the provision it had made for this non-performing assets (NPA), the bank said.
PNB had the second-highest exposure among the lenders to Bhushan.
After the buyout, PNB and other lenders will continue to own 12 per cent in the acquired entity, giving them the opportunity to cash out later when valuation of the company goes up.
With a current market capitalisation of Rs 5.98 billion, at Rs 27.75 per share for Bhushan, the share for lenders works out to Rs 720 million. BNPL has acquired 72.65 per cent stake in Bhushan by paying Rs 364 billion, of which Rs 352 billion will be to financial creditors.
This is the second resolution from the first list of 12 major accounts identified by the Reserve Bank of India. The first one was Vedanta buying Electrosteel last month. PNB said more such resolutions could help PNB’s loan book. Its gross NPAs at end-March was Rs 866 billion.
The balance sheet was also hit by fraudulent loans of Rs 143 billion to the jewellery firms of Nirav Modi and Mehul Choksi. PNB had to provision Rs 102 billion in its books after RBI’s new stressed assets resolution norm.
The provision is Rs 71.8 billion towards the fraud, half the amount involved.
PNB’s loss in the fourth quarter of 2017-18 was higher than the combined loss of Allahabad Bank, Union Bank of India, Axis Bank, UCO Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra in the same period.
Sebi to consider penal action against PNB, Gitanjali Gems
Markets regulator Sebi will consider penal action against Punjab National Bank (PNB) and Gitanjali Gems after completion of its probe into suspected trading and disclosure related issues in the matter of over Rs 140 billion banking fraud, senior officials said.
The markets watchdog last week issued a warning letter to PNB for delaying disclosures to stock exchanges about the fraudulent transactions allegedly carried out by absconding Nirav Modi and Gitanjali Group of companies. However, the probe is continuing and the penal action would depend on the final outcome of the investigation, the officials added.
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FinMin expects banks to get back over Rs 1 trillion
Enthused by successful conclusion of Bhushan Steel case, the finance ministry expects banks to write back more than Rs 1 trillion after the resolution of all 12 non-performing assets (NPA) cases referred to insolvency proceedings by the RBI it its first list.
Last week, Tata Group acquired the controlling stake of 72.65 per cent in the debt-ridden Bhushan Steel for around Rs 360 billion will help in cleansing the banking system as well as boost lenders profitability.