Shares of ICICI Bank are flying off the shelves on hopes that its loan to Essar may be repaid after deal with Rosneft. ICICI Bank jumped 7 percent intraday on Monday.
Essar Oil deal may directly benefit ICICI Bank's loan exposure. ICICI's exposure to Essar promoters (via Essar Global) is around Rs 6000 crore while its watch list loans portfolio stands at around Rs 38723 crore. Essar is planning to reduce its group debt -- Rs 88,000 crore -- by more than 50 percent using the Rs 86,100 crore proceeds that it will receive in the all-cash deal.
Stress on Essar Steel and Essar Power accounts is also expected to go down.
Commenting on the deal, Chanda Kochhar, MD & CEO, ICICI Bank said “This deal is also a significant step in the process of deleveraging the balance sheets of Indian corporates. ICICI Bank has been closely working with various companies including the Essar group to help them deleverage their stressed balance sheets. We will continue working towards this objective with others.”
On an optimistic note, Motilal Oswal says that key beneficiaries from the Essar Oil deal are likely to be ICICI Bank, Standard Chartered Bank, SBI Bank, PNB, IDBI and Canara Bank.
"Most banks have declared their exposure to Essar Steel as non-performing and if the promoters infuse capital, the banks would be willing to take some haircut under the S4A scheme. This would be the largest case of NPA resolution for the system. The current deal would also serve as a strong message for other debt burdened promoters (especially mid-sized companies) to deleverage," the brokerage firm says in a note.
Russia's state-controlled oil giant Rosneft and its partners on Saturday took over India's second biggest private oil firm Essar Oil in an all-cash deal valued at about USD 13 billion.
The deal includes Essar Oil's debt of USD 4.5 billion and about USD 2 billion debt with the portcompany and power plant. Also, the near USD 3 billion dues to Iran for past oil purchases will continue to be on Essar Oil books.
At 12:17 hrs ICICI Bank was quoting at Rs 256.05, up Rs 14.20, or 5.87 percent.
Posted by Nasrin Sultana