An experienced banker, Uday Kotak, said on Sunday that there is no systemic risk to the Indian financial system, and due to this recent event, there is an apparent reference to the decline in shares of the companies in the Adani Group.
His statement follows Finance Minister Nirmala Sitharaman’s assertion that India’s standing and macroeconomic fundamentals have not been impacted by the sale of the Adani Group companies.
Kotak, who serves as the managing director and CEO of Kotak Mahindra Bank, posted on Sunday on the microblogging website Twitter, “I do not see systemic risk to the Indian financial system from recent events.”
However, he asserted that they rely more on foreign sources for both debt and equity capital. Indian corporations face challenges and vulnerabilities.
“Time to further strengthen and grow Indian underwriting and capacity building,” Kotak added.
Adani Enterprises (AEL), the company that acts and plays as the Adani Group’s flagship, experienced intense selling pressure and saw a 54% decline in share price following the release of the Hindenburg Research report on the Adani Group on January 24.
Since then, nine more listed Adani stocks have dropped by up to 50%, and one of them even contributed to the Sensex’s decline on February 1 during the budget’s release in a single day.
The Group was forced to cancel AEL’s follow-on public grants a day after achieving full subscription to the problem at hand due to interest from non-institutional investors and large corporations (FPO).
On Saturday, the capital markets regulatory body, Sebi, issued a statement outlining its monitoring and procedures. In addition, in all “specific entity-related matters,” “a proper and appropriate action” was promised.
The banking industry is still robust and stable, the Reserve Bank of India (RBI) stated on Friday.
According to a report by investment firm CLSA, the top-five Adani group companies – Adani Enterprises, Adani Ports, Adani Power, Adani Green, and Adani Transmission – have a combined obligation of Rs 2.1 lakh crore.
Indian banks’ exposure is less than 40 percent of the total group debt. The exposure of private banks to this is less than 10% of the total group debt.
However, according to the banks, their exposure to the group is constrained by the RBI’s Large Exposure Framework (LEF) and is protected by assets that follow the cash.
SBI Chairman Dinesh Khara stated in a statement that the bank’s overall financial exposure to the Adani Group was 0.9%, or Rs 27,000 crore, as of the end of December 2022.
Is Kotak supporting adani? Uday Kotak raises a very essential point without mentioning Adani.
Uday Kotak, the chief executive officer of Kotak Mahindra Bank, said on Sunday, “(It’s) time to further strengthen Indian underwriting and increasing capability.”
Concerns about Indian banks’ exposure to the financially troubled Adani Group prompted him to make his statement. In response, Kotak stated that he does not perceive a systemic risk to the Indian financial system.
Earlier, the Securities and Exchange Board of India (Sebi), Finance Minister Nirmala Sitharaman, along with Reserve Bank of India (RBI) asserted that the risk to the Indian financial system, especially to banks, is minimal. But it’s not the only way that the Adani incident hurts India
The cost of capital and loans will increase for everyone if this causes foreign lenders and investors to lose faith in India’s governance systems, not just the Adani Group of companies.
After deducting its cash balance from its gross debt of Rs. 1.88 trillion, the group had a net debt of Rs. 1.61 trillion in March 2022.
Stocks of the Gautam Adani-led company have fallen exchanges that followed activist short-seller Hindenburg Research, based in the US, made a long list of accusations against it, including share predatory pricing and fraudulent transactions.
The Adani group has called the accusations “lies” and claimed that it abides by all legal and disclosure requirements.
In just six trading sessions, the ten listed Adani Group companies have seen their combined value erode by more than Rs 8.5 lakh crore. In addition, Adani Enterprises had to cancel a large number of Rs 20,000 crore share sales.
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