Adani loan exposure fears hit big bank shares

Mumbai: Large banks slumped on Dalal Street on Friday on heightened concerns over their loan exposure to the Adani Group in the wake of the drop in the conglomerate's shares.

The Nifty Bank index dropped 3.1% to close at 40,345.30 as against the 1.6% decline in the benchmark Nifty to 17,604.35. dived 7.5%. , , and plunged 4-5% on Friday.

"The market seems to be looking at some adverse scenarios of banks' exposure to the Adani Group especially when their share prices are falling," said Siddarth Bhamre, head of research Broking. "That is weighing down the risk appetite for bank shares."


Brokerage CLSA said Adani Group's debt disclosures indicate a declining share of bank funding in Adani's overall debt mix.

"Bank debt (term loans, working capital, and other facilities) formed just 38% of the total debt, while bonds/CP constitute 37%, 11% is borrowing from financial institutions and the remaining 12-13% is inter-group lending," said the firm in a report dated January 26 that examined lenders' exposure to the Adani Group.

Out of the total banks' loan exposure to Adani Group companies, private banks' exposure is below 10% of total group debt, said CLSA. For PSU Banks, the exposure is 30% of the group debt but this debt has not increased in the past three years, said the brokerage.

"For private banks, our feedback suggests that they have potentially reduced their exposure on aggregate and the residual debt to the group is largely in very strong cash flow businesses, such as power and airports," said CLSA. "We estimate the absolute exposure at 1.4% of private banks' FY24 networth - any weakness due to concerns over the group's debt would provide an opportunity to buy, in our opinion."

The selloff in banks resulted in the Bank Nifty falling below a critical support level of 41,800, said Kunal Shah, senior technical analyst at . The index is near its next key support of 40,000, which is about 0.8% below Friday's closing level.