Private sector lender Kotak Mahindra Bank on Thursday said that it has a "small exposure" to the embattled Adani Group, which has been made in line with its credit philosophy.
Paritosh Kashyap, president and head for wholesale banking at Kotak Mahindra Bank, told PTI that the issues surrounding Adani Group are more of a "capital market and valuations issue and not a credit issue".
"We have a small exposure to the group. We do business with every corporate in the country, and our exposures are in line with our credit philosophy and the size of our balance sheet," Kashyap said.
He added that operating companies in the group have "reasonable leverage", coupled with strong profitability and balance sheets.
The embattled conglomerate has been under surveillance by different government bodies after US short seller Hindenburg Research in a scathing report noted that the conglomerate is misusing tax havens and accused it of financial misdeeds, accounting fraud and stock manipulation. It also said that the stocks are overvalued by 85 per cent.
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The report, which was published on January 24, led to a massive rout in Adani Group's listed companies’ stocks, which made investors nervous.
Kashyap of Kotak Mahindra Bank said the overall wholesale banking book is bereft of any stress for Kotak Mahindra Bank and also expressed concerns about the lack of any stress emerging for over seven years now.
"As a segment, I can't say anyone which has a stress," he said, adding that the bank is open to doing business with segments like infrastructure, real estate and lending to non-banks, which is otherwise considered as prone to stress.
The Adani Group, which has companies in sectors such as energy, infrastructure, and ports, has been the subject of scrutiny by investors following the rout. This is mainly due to concerns over the Group's high leverage and its impact on the banking sector, and government-owned financial institutions like the Life Insurance Corporation (LIC) of India. A CLSA recent report has highlighted that 39-40 per cent of the company's debt, which is close to Rs 2 lakh cr, is from the Indian banking sector from PSUs to private banks.
The Reserve Bank of India (RBI) has launched a special examination of the banking system's exposures to Adani Group entities, and Governor Shaktikanta Das has said that a single case cannot impact the broader banking system.
According to experts, the Indian banks' exposures are to operative companies and not against shares at the listed holding company level. This is so because in most cases barring asset buys by infrastructure companies, Indian banks are not allowed to lend more than Rs 20 lakh as loans against shares, which has come in as a helpful regulatory mandate.
Earlier, the country’s biggest lender State Bank of India (SBI), Bank of Baroda, and Life Insurance Corporation had clarified their exposures and assured investors that the debts are well in order.
Last month, SBI said its overall exposure to Adani Group is about 0.9 per cent of its total loan book, which was about Rs 27,000 crore, and it has not extended any loan against shares to the group.
Insurance behemoth LIC also came out with its stand. It said its overall exposure is over Rs 35,000 crore, with a large part of it being in equity investments which have suffered alongside the rout in stocks, and some reports pegging the valuations dipping below the purchase price as well. The insurance major has invested in seven of 10 listed companies of the Adani Group. As of December 2022, LIC held 9.14 per cent in Adani Ports; 5.96 per cent in Adani Total Gas; 4.23 per cent in Adani Enterprises; 3.65 per cent in Adani Transmission; and 1.28 per cent in Adani Green Energy.
Since the report was made public, LIC's exposure to Adani group firms' stock has come under scrutiny. The group, after the report was out, said the total purchase value of equity, purchased over the last many years, under all the Adani Group companies was over Rs 36,000 crore and the market value as on January 27 was Rs 56,142 crore.
In mid-February, the state-run insurance company lost nearly Rs 50,000 crore on its investments in the Adani Group stocks. The combined market value of its investments in seven Adani stocks - Adani Enterprises, Adani Green Energy, Adani Ports and Special Economic Zone, Adani Total Gas, Adani Transmission, Ambuja Cements and ACC - plunged to Rs 33,242 crore as on February 23 from Rs 82,970 crore as on December 31, 2022.
Also read: ‘More confident of Adani Group’s business prospects’: LIC chairman on meeting Adani management
On February 27, shares of LIC hit their 52-week low level of Rs 566 against a previous close of Rs 584.65. The weakness in Adani stocks and deep erosion in m-cap got reflected on the LIC counter as well.
Also read: Adani group stocks: LIC notional loss at Rs 50,000 crore in 50 days; here're calculations
Bank of Baroda had said the public lender has "absolutely no concern" about its exposure to tumult-hit Adani Group. After announcing December quarter results, the banks said its exposure to Adani Group is one fourth of the large exposure framework of RBI. It said that 30 per cent of total exposure to Adani Group is a joint venture with public sector companies.
Debt repayment As per reports, Gautam Adani and his family have prepaid all borrowings backed by his conglomerate Adani Group's shares. A Bloomberg report said company executives told investors at a meeting in London that all borrowings have been prepaid.
The investor meeting was part of a worldwide roadshow launched by the conglomerate aimed at reassuring investors that the conglomerate's finances are under control, the report said. Another Bloomberg report said the Adani group has repaid a $500 million bridge loan that was due Thursday.
Also read: Adani Group repays $500-mn bridge loan due Thursday to boost investor confidence: Report
(With PTI inputs)