But finally, after 830 days of entering the insolvency process, the Supreme Court ruled in favour of the committee of creditors (COC) and asked the promoters to hand over the keys of Essar Steel to winning bidder Arcelor Mittal SA.
This means that lenders to Essar Steel will soon get their cheques and it is no chump change. For SBI, this means ₹13,220 crore worth of money. In total, the promoters owe banks a whopping ₹49,473 crores.
Since the case took 830 days or close to nine quarters, SBI’s Kumar had run out of patience and provided 100% of the exposure. Now, he can write these back and boost profits. Considering 90% recovery, this write back is a cool ₹12,000 crore.
Analysts have already noted the gains. Those at JP Morgan said that SBI and ICICI Bank are the biggest winners in terms of recovery.
“While the SC does ask the COC to consider operational creditors as well, we believe recovery for banks in the Essar Steel case will be closer to 90% (as suggested by the COC) vs 60% (as suggested by the NCLAT) – within our coverage universe, the key beneficiaries should be SBI followed by ICICI Bank," said analysts at Nomura in a note.
SBI’s shares have risen over 6% since Friday. But investors should note that stress has been piling up for banks from other large conglomerates.
The pain from Dewan Housing Finance Ltd and Essel Group is big and the telecom sector has emerged as a new point of stress. Nomura estimates SBI’s stress to be close to ₹29,000 crore through DHFL, Indiabulls Group and Vodafone-Idea.
Banks are not off the hook yet, as far as stress is concerned and investors would be right in being cautious. For now, SBI and others can enjoy a bit a of a sunshine in a long winter.
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