Adani-Hindenburg Saga: Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

Adani-Hindenburg Saga: Public sector lender Bank of Baroda on Friday said it has reduced exposure to the embattled Adani Group entities over the last two years, and has no concerns on asset quality issues with the conglomerate. The bank's managing director and chief executive Sanjiv Chadha told reporters that the bank's overall exposure to the ports-to-media conglomerate's entities is one fourth of the single group exposures allowed under the Large Exposures Framework (LEF) but refused to share a number.

In the LEF, RBI says all the exposure values of a bank to a group of connected counterparties must not be higher than 25 per cent of the bank's available eligible capital base at all times. Without revealing the quantum of investments, Chadha said that 30 per cent of the bank's total exposure to Adani group companies is towards entities that are in joint venture with state-run entities or the exposure is backed by a guarantee from government-owned entities.

He said the overall exposure has reduced as a percentage of the balance sheet over the last two years. Answering a specific question on Adani Group exposures, the MD and CEO of the bank said there is "absolutely no concern" from an asset quality perspective and there is no request from the group for refinance as well.

The going has been tough for the Adani Group over the last week since the release of a report by a short-seller alleging it to be the biggest con in corporate history, by indulging in fraudulent transactions and share price manipulation. The Group was forced to cancel a Rs 20,000-crore share sale a day after the issue scraped through, because of a continued steep decline in share prices.

Amid the rout in the share prices of Adani Group's listed entities -- the flagship company tumbled 20 per cent at opening on Friday -- Chadha explained that banks give corporate loans not based on share prices but by book value and assets as collateral.

Additionally, most of the loans made to corporate entities are secured, and working capital loans, which constitute a bulk of the exposure to corporate entities, is secured by cash flows.
Chadha said the bank's corporate loan book has been performing outstandingly well and pointed out that the slippage stood at as low as Rs 13 crore for the December quarter as against thousands of crores which the banks used to report earlier.

Advances unpaid for over 30 days are also low at just 0.4 per cent of the overall corporate book, which is nearly 44 per cent of the overall domestic loan book. The bank reported a 75.4 per cent jump in its December quarter net at Rs 3,853 crore. The BoB scrip closed 6.20 per cent up at Rs 163.65 a piece on the BSE as against a gain of 1.52 per cent on the benchmark