Indian banks' credit risk from Adani exposure seems contained, JPMorgan says

Adani Total Gas

22/11/2024 08:17

By Siddhi Nayak and Bharath Rajeswaran
       MUMBAI/BENGALURU, Nov 22 (Reuters) - Indian banks' loan
exposure to the embattled Adani Group seems "manageable" and any
credit risk in the aftermath of its billionaire
founder-chairman's indictment in the United States looks
"contained," JPMorgan said on Friday.
    U.S. prosecutors have charged Gautam Adani, one of the
world's richest people, and seven other people with paying $265
million in bribes to Indian government officials for contracts,
including to develop the country's largest solar power plant.
    Adani Group has said the accusations are "baseless" and that
it will seek "all possible legal recourse".
    Shares of Indian state-owned banks fell 2.7% on Thursday
over worries about the extent of their exposure to the
ports-to-power conglomerate that spans about 10 listed companies
in all.
    However, JPMorgan analysts said Indian banks' exposure to
the group was around 0.3% of outstanding loans as of March and
that the loans were backed by asset cover.
    "We don't see major credit risk as the underlying companies
are not implicated," the Wall Street brokerage said in a note.
   Moreover, Indian banks' exposure to Adani Green  ADNA.NS ,
which is at the centre of the allegations, is "materially lower"
at just six basis points of banking system credit as of
September, JPMorgan said.
    "We do not see any systemic risk to Indian financials from a
potential credit event in Adani Green, given the low exposure,
asset cover, improving operating performance of the broader
Adani Group and the capital and standard asset buffers at
banks," the investment bank said.
    While credit risk to banks may be contained, sources told
Reuters that global and local banks may now limit fresh funding.
    Four local bankers that Reuters spoke to said they would
take a wait-and-watch approach and that any fresh funds would
likely be at higher interest rates due to the increased risks.
    "Loan pricing is expected to go up, but we will wait and
watch for at least 3-4 months before we initiate any fresh
funding request," said an official at a private lender that has
exposure to the Adani group.
    The lender's internal assessment shows the Adani group has
the ability to repay loans and their cash flows remain strong,
the banker said, asking not to be identified as he is not
authorised to speak with the media.
    Shares of Indian state-owned banks rebounded on Friday.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Funded exposure of India's banking system to Adani portfolio   
https://reut.rs/3CGbHba
Fund- and non-fund-based exposure of Indian banks to Adani Green
   https://reut.rs/3UZu3KI
Debt breakdown of Adani group by source    https://reut.rs/494PDTB
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Siddhi Nayak and Bharath Rajeswaran; Editing by
Savio D'Souza)
 ((Siddhi.Nayak@thomsonreuters.com; +91 22 6921 7848; Reuters
Messaging: X: https://twitter.com/siddhiVnayak))