If the banks are able to encash the capital infusion programme, they can easily raise much more than Rs 58,000 cr, Assocham said in a report. Earlier this week, Centre approved massive recapitalisation plan for state-run banks worth Rs 2.11 lakh crore.
New Delhi The change in market perception of public sector banks (PSBs) following the announcement on their recapitalisation has the potential to fetch the government much higher values than that envisaged in the bank support plan via stake divestment in PSBs, industry chamber Assocham said on Sunday.
“If the change of perception for PSU banks, post the mega capital infusion scheme is any indication, dilution of government equity, up to 52 per cent in the state-owned lenders can fetch valuation much higher than the estimated potential of Rs 58,000 crore as provided in the Rs 211,000 crore re-capitalisation plan,” Assocham said in a report.
“As PSU banks have been given over-weightage following the government announcement of capital infusion, their valuations have already gone up between 20-30 per cent in the first few days, even before unveiling of details of the recapitalisation bonds and the reform roadmap,” the industry chamber said. “As the details emerge in the coming few weeks and months, these stocks, particularly of the larger banks can easily move up by another 30-40 per cent, taking their market capitalization commensurately high. This would surely mean, that if the banks are able to encash the sweet spot, they can easily raise much more than Rs 58,000 crore,” it added. According to Assocham, once bank lending begins to pick up, there would be consequent advantages by way of higher economic growth and tax buoyancy.
“All this financial revamp would ultimately lead to a huge benefit to the government itself, in terms of higher market capitalisation. After all, the largest shareholder would still be the government of India,” Assocham Secretary General D.S. Rawat said in a statement here.
In a major bid to boost flagging economic growth and increase bank credit flow, the Union cabinet, earlier this week, accorded approval for a massive recapitalisation plan for state-run banks worth Rs 2.11 lakh crore.
