MUMBAI: State-owned Bank of Baroda has agreed to pay $600 million, or approximately ₹5,700 crore, in an out-of-court settlement to resolve years-long litigation linked to the collapse of United Arab Emirates (UAE)-based healthcare provider NMC Health.
The one-time payout, equivalent to nearly 28% of the lender's fiscal year 2026 (FY26) net profit of ₹20,021 crore, is expected to dent earnings in the coming quarters, although analysts say it is unlikely to affect the bank's long-term growth prospects or capital position.
“The bank has not made a provision for the settlement and treated it as a contingent liability, which means it's a fresh hit on the company’s profit and loss account,” said Akshay Tiwari, associate vice president and research analyst at Asit C Mehta Investment Intermediates.
Sunny Agrawal, head of fundamental research at SBI Securities, said the settlement amount will likely impact first or second quarter earnings and will also weigh on FY27 profitability. However, since it is a one-off event, the bank is likely to continue growing in double digits, with an annual profit potential of ₹20,000 crore and above, Agrawal added.
“Bank of Baroda continues to have a healthy capital position, and the settlement is unlikely to affect its long term financial stability or growth prospects,” said Abhinav Tiwari, research analyst at Bonanza.
An email sent to Bank of Baroda earlier on Friday remained unanswered till press time.
What was the litigation about?
According to Bank of Baroda's FY26 annual report, the administrators handling the bankruptcy of NMC Group had sued Bank of Baroda, former promoter of NMC Group B.R. Shetty and former NMC executive Prashant Manghat before courts in the Abu Dhabi Global Market and the UK. The administrators alleged that NMC Group collapsed because of fraud committed by some shareholders, senior management and employees between 2012 and 2020.
The administrators had also alleged that Bank of Baroda's Abu Dhabi branch helped process financing transactions that enabled NMC Health and its related entities to conceal their true financial position, as per news reports. They further alleged that the bank, along with several other lenders, failed to carry out adequate anti-money laundering, know-your-customer (KYC) and other due diligence checks, allowing the alleged fraud to continue for longer and increasing losses for creditors.
The litigation stemmed from insolvency and civil proceedings initiated before the Abu Dhabi Global Market Court of First Instance and the High Court of Justice of England & Wales in relation to NMC Health and its group companies. The Abu Dhabi proceedings had commenced trial on 23 March, while the English proceedings had been stayed pending the outcome of the Abu Dhabi case.
Under the settlement agreement, Bank of Baroda's Abu Dhabi branch agreed to pay about ₹5,700 crore to the joint administrators of NMC Health PLC, NMC Healthcare Ltd and NMC Holding Ltd.
Following the settlement, the proceedings before the Abu Dhabi court have been discontinued, while the UK proceedings are in the process of being withdrawn, according to the filing.
The settlement marks a shift from the bank's position in its FY26 annual report, where it had maintained that claims brought by the administrators of NMC Group's bankruptcy could not be crystallised because of its "robust defence in facts and law."
In the annual report's assessment of provisions and contingent liabilities, the bank had said, “There is a high level of judgement required in estimating the level of provisioning wherever a liability seems probable. Accordingly, unexpected adverse outcomes may significantly impact the bank’s reported profit and state of affairs presented in the balance sheet.”
Shares of Bank of Baroda traded 3.3% lower at ₹251.50 apiece as of 02.40 pm today, having declined 4.2% on Thursday after the settlement was disclosed.
Bank of Baroda carries the second-highest weight, about 13%, in the Nifty PSU Bank index. The Nifty PSU Bank index has gained 18.23% over the past year, while Bank of Baroda shares have risen 3.78%.
Operational performance
Separately, the bank on Thursday released its business update for the first quarter of FY27, reporting total business growth of 15.46% year-on-year to ₹30.51 trillion. Global advances rose 17.42% to ₹14.17 trillion and deposits grew 13.81% to ₹16.34 trillion. Domestic advances grew 16.14% to ₹11.51 trillion and domestic deposits grew 13.81% to ₹16.33 trillion.
The company's EPS is expected to grow to ₹43.2 in FY27 from ₹38.7 in FY26, according to a Motilal Oswal report dated 3 July.