News ID: 264422
Published: 0652 GMT January 17, 2020

India’s banks face risk from $13b telecom dues, UBS says

India’s banks face risk from $13b telecom dues, UBS says
India's supreme court in New Delhi (SAJJAD HUSSAIN/AFP VIA GETTY IMAGES)

India’s top court’s rejection Thursday of an appeal by wireless carriers to review $13 billion they owe to the government raises risks for lenders to the companies, according to UBS Group AG.

Payment of the dues may erode the telecom operators’ cash flows, especially those of Vodafone Group Plc’s India venture. Under the October verdict, Vodafone Idea Ltd. has to pay $4 billion, while Bharti Airtel Ltd. has to give $3 billion by the end of next week. The court also rejected requests to rehear petitions seeking relaxations on the deadline, Bloomberg reported.

“IndusInd, YES, SBI appears to have relatively high exposure to Vodafone Idea,” analysts Vishal Goyal and Ishank Kumar wrote in a note. For the banking system, loans outstanding to the telecom sector were 1.1 trillion rupees or 1.3 percent of total loans in September, the note added.

IndusInd Bank, Yes Bank and Punjab National Bank are the least preferred stocks in the sector, according to the UBS note. The investment bank remains positive on Axis Bank Ltd., ICICI Bank Ltd. and HDFC Bank Ltd.

Still, brokers including UBS are hopeful that the government will potentially provide some relief to the telecom carriers via staggered payments or waiver of interest and penalty.

   
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