The Supreme Court verdict on telecom companies having to repay adjusted gross revenue dues by Mar 17 is likely to pose a problem for banks, along with telecom operators, analysts say.
Banks, analysts say, will have to make additional provisions in Jan-Mar for their exposure to such companies.
Bharti Airtel reportedly faces a claim of around 356 bln rupees in adjusted gross revenue dues, while Vodafone Idea may have to cough up 530 bln rupees, and Tata Teleservices has dues to the tune of around 140 bln rupees.
Loans to telecom companies, especially to Vodafone Idea, may become non-performing in Jan-Mar, as the latter's management has stated that the company will have to shut shop if the government does not intervene or the top court provides some relief for repayment of dues.
"The ruling could also have repercussions for the banking industry, should there be defaults linked to the Supreme Court decision. The banking sector's exposure to telco firms stood at 1.3% of loans at 2018-19 (Apr-Mar), within which we believe Bharti Airtel and Vodafone Idea account for a significant share," global rating agency Fitch had said on Jan 21, after the Supreme Court rejected telecom companies' review plea in adjusted gross revenue case.
Similarly, Suman Chowdhury, president of ratings at Acuite Ratings “Research Ltd said, "The SC (Supreme Court) order directing the telecom companies to settle the pending AGR (adjusted gross revenue) dues by Mar 17 puts further uncertainty on their operational sustainability, particularly that of Vodafone Idea."
Bharti Airtel will be able to pay its dues following the recent fundraising, Chowdhury said.
IDFC First Bank Ltd has already reported a net loss of 16.4 bln rupees Oct-Dec due to higher provisions to cover its exposure to a legacy telecom account.
As on Dec 31, the private sector lender's exposure to the mentioned telecom company was 32.4 bln rupees for which it created provision of 16.2 bln rupees.
This account is likely to be that of Vodafone Idea as the bank's management, in 15th Edelweiss Conference had said that the bank was ahead of its peers in recognising stress in certain companies including Vodafone Idea.
State Bank of India's total exposure to the telecom sector, as on Dec 31, was 377.93 bln rupees. Of this, loans of 286.25 bln rupees are standard and 91.68 bln rupees have turned non-performing.
Speaking to business news channel ET Now, SBI Chairman Rajnish Kumar said the bank has created over 90 bln rupees for telecom sector bad loans and that the bank will meet with telecom operators management to discuss on repayment of dues.
SBI has around 112-bln-rupee exposure to Vodafone Idea. IndusInd Bank and ICICI Bank have exposure of 30 bln rupees and 17 bln rupees, respectively, to Vodafone Idea.
Market participants hope that the apex court, at the next hearing on Mar 17, gives a moratorium for repayment, which may provide some relief to both telecom operators and banks as the former will get time to raise capital and provide for dues and the latter will not have to declare the assets non-performing in Jan-Mar itself.
