Gautam Adani has over 255 Crore Debt of JK Bank

JAMMU: Jammu and Kashmir Bank, the premier financial institution of the region, has over Rs 255 crore exposure to the Adani group, which is in the eye of the storm over a report by US-based short seller Hindenburg Research, leading to the company’s shares crashing by over Rs 100 billion.

As bloodbath on the D-street continues and the top management of the key banks go into huddle, does this exposure of Jammu and Kashmir Bank to Adani group give a reason to worry?

No one has definite answers, particularly after Jammu and Kashmir Bank’s shares slightly tumbled by 0.5% on Thursday.

However, J&K bank’s chairman Baldev Prakash told The Dispatch that ‘there is no cause to worry’.

The Bank appears to have recently loaned Rs 255.6 Crore to Adani group, which forms a small portion of over Rs 80,000 crore exposure of all Indian banks in absolute numbers, but becomes a significant sum of money considering the size of Jammu and Kashmir bank as it works out to be 3% of its revenue.

Details accessed by The Dispatch reveal that the loan is a fully drawn down account, with the sanctioned amount and the amount exposed in Adani group being the same and that has set the alarm bells ringing in the market and among the stakeholders.

The share price of Jammu and Kashmir bank in the stock market fell by 0.5% on Thursday, adding to an overall fall of nearly 5% in the last 5 days.

While the fall in share market is at par with the other private banks, J&K bank’s Rs 255 Crore exposure while being only 3% of its revenue, is far higher than other Indian banks, say SBI, PNB, IndusInd bank or even the LIC, which stand at less than 1%.

The experts believe that a slight panic will start setting in among the bank’s clientele in J&K and Ladakh, where it has the largest footprints, even though the bank’s top management doesn’t agree.

Speaking to The Dispatch, Baldev Parkash, Managing Director and Chief Executive Officer of Jammu and Kashmir Bank said that ‘there is no cause of worry as yet’.

In fact, Mr Prakash was reluctant to comment on the issue, even as all major banks issued statements after the RBI sought details of their exposure in Adani group this morning.

“Details are confidential,” said Mr Prakash, but he claimed that there is no cause for worry.

Confirming that the loan to Adani group is ‘very recent’, another senior bank official, on the condition of anonymity, told The Dispatch that the loans are secured and there is no reason to worry, not at least for next few months.

Independent experts believe that while there may not be reasons to worry as of now, the ‘problems could arise in a year or so’.

“Adani Group is a large enterprise and has enough funds to service its debt. I don’t think there is a reason to worry for at least one year,” an expert said, when reached out by The Dispatch.

Another expert told The Dispatch, “Late last year, J&K Bank sold nearly 1,000-crore of its NPAs to NARCL in order to improve its balance sheet. While its exposure to the Adani group does not yet fall in the NPA category, the Rs 255.6 crore loan is now in slightly precarious territory.”

The bank has set a goal of raising Rs 1,000 crore capital by the end of the current fiscal to fuel its expansion plans.

Shares of Adani Group companies continued their downward spiral on the stock market, with a drop of nearly 23% on Thursday, at their lowest since March last year. The trouble for the Indian giant started last week when Hindenburg Research alleged that the Adani Group was engaged in “a brazen stock manipulation and accounting fraud scheme”.

The group, which late Wednesday evening cancelled its follow-on public offer, has lost $100 billion in market capitalisation in the last six trading sessions.

Indian banks have around Rs 80,000 crore exposure in Adani, which is 38 per cent of the group’s total debt. Bank debt—term loans, working capital loans, and other facilities—constitute about 38 per cent of the group’s total debt.

The Reserve Bank of India (RBI) on Tuesday asked banks to furnish details of the amount of loan sanctioned and that outstanding to the group as on January 31.

State Bank of India (SBI)—the country’s largest lender—said its exposure to the group is well within the limit prescribed by the Large Exposure Framework of RBI and is secured by cash generating assets. With adequate TRA (trust and retention account) / Escrow mechanism in place, debt service will not be a challenge, SBI said.

Punjab National Bank—another large state-run lender—said its exposure to the group was Rs 7,000 crore, but that is backed by adequate cash flows and there is no worry on repayments at present.

Life Insurance Corporation (LIC) said its total exposure to the Adani Group is less than 1% of its total assets under management (AUM) at book value, and that its holdings are profitable even after the latest rout in the stocks of the capital-intensive infrastructure conglomerate.

IndusInd Bank, in a clarification to stock exchanges said  bank’s total loan outstanding towards the Group is at 0.49 per cent of the bank’s loan book. Further, the total non-fund outstanding is at 0.85 per cent of the loan book, the bank said.

“Majority of the fund and non-fund exposures is working capital requirements and same is secured. There is no other exposure outside of the above, inter alia, including towards any offshore entities, loan against shares or pledge of shares of promoter, investment book instruments etc,” IndusInd Bank said.

(By Sahil Rasgotra for The Dispatch)

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