Telco distress call: SBI says it’s prepared for the worst

MUMBAI: State Financial institution of India (SBI) chairman Rajnish Kumar on Friday mentioned the financial institution was ready for the worst following the Supreme Courtroom order asking telecom corporations to instantly pay adjusted gross income (AGR) dues to the federal government. SBI has Rs 29,000-crore mortgage publicity to telecom, the most important amongst Indian banks.
Shares of SBI fell 8%, whereas different lenders with massive publicity to telcos like Sure Financial institution and IndusInd Financial institution additionally dropped as much as 5% on Friday. Analysts concern that the SC order may result in a Vodafone Thought shutdown. “It may result in Rs 1.2-lakh-crore debt default, large-scale job losses and subscriber churn,” mentioned Motilal Oswal in a report.
Addressing reporters on the sidelines of the Nasscom Software program summit right here, Kumar mentioned: “Our exposure to them is Rs 29,000 crore. After this order we will ask them what their plans are to comply with the order and whatever is the situation, we are capable of handling it.” He added that he anticipated the telcos to have recognized “a course of action” because the order was recognized for a while.

Thus far, SBI has offered just for non-performing belongings (NPAs) in its telecom loans. “We had NPAs of about Rs 9,000 crore and there is recovery expected there. On the standard assets, we did not feel the need to provide,” mentioned Kumar. Apart from the loans, SBI has a further Rs 14,000 crore of non-fund publicity, which incorporates ensures to the federal government, the place the telcos haven’t defaulted.

“It is now for the telecom companies to decide how to find the money or what course of action they will take,” mentioned Kumar. Analysts had earlier anticipated that the federal government would offer aid to the telcos. The Centre is relying on Rs 90,000 crore of spectrum dues from Vodafone, which in flip owes banks Rs 30,000 crore. Provided that the promoter’s funding within the firm is Rs 15,000 crore there’s a chance that Vodafone and Aditya Birla group will stroll away.
In December final 12 months, Aditya Birla Group chairman Kumar Mangalam Birla had mentioned that Vodafone Thought might need to shut down if there isn’t a aid within the statutory dues. If Vodafone shuts store, it’s seen to profit Reliance Jio and Airtel. “Bharti is relatively well placed considering Rs 18,800-crore cash on books and its ability to raise requisite capital. In the absence of any government support, we see this market heading towards a duopoly, which is likely to boost Bharti’s market share,” mentioned Sandip Agarwal of Edelweiss Analysis.
Final month, India Rankings had downgraded Vodafone India from ‘IND BBB-’ from ‘IND BBB’ and retained on ranking watch with destructive implications. “The downgrade reflects the crystallisation of adjusted gross revenue related liabilities for Vodafone Idea after the Supreme Court’s adverse ruling on January 16, 2020, dismissing the review petition filed by telcos. The SC ruling provides clarity on the liabilities that are payable by Vodafone Idea to the department of telecommunications, which was earlier contingent upon the outcome of the review petition,” mentioned Priyanka Bansal, senior analyst with India Rankings after the January 16 choice.

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