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The NPA scare ratcheted up by BJP MP Subramanian Swamy is spreading. Share prices of companies that have high debt on their books and the banks that have lent them and those already suffering from a negative public perception took a sharp beating on Friday.
Apart from Adani Group stocks, which have been sliding for the past three trading sessions, RCom, JP Associates, Lanco Infra, Essar Shipping, Bhushan Steel, IVRCL and Punj Lloyd saw their share prices fall between 2 per cent and 12 per cent since Swamy’s comments.
Swamy’s tweet
In a widely commented and shared tweet on Tuesday, Swamy said Adani should be made accountable or he would file a Public Interest Litigation in court for recovery of bank loans from him.
These companies within their respective corporate groups are among the 25 most debt-heavy in India. Apart from the public sector banks’ stocks that have seen a sharp erosion in value in the wake of the Nirav Modi loan scam, private lenders such as ICICI Bank, Axis Bank and YES Bank took a beating this week after Swamy’s tweet.
“Swamy’s tirade against Adani group has caused a domino effect on perception and the stock prices of other debt-heavy groups and banks that have lent to them,” said the CEO of the institutional equity desk at a Mumbai brokerage. “The worry is more about banking stocks. Swamy is seen as someone who will follow up on his allegations and can bring about the downfall of those whom he attacks. Traders think this may hit the banking system hard as all those putting up an ‘act’ of restructuring are under the scanner.”
Most of these companies have seen a 90 per cent wipeout of their market-cap over the years; the fall of the past couple of days could render them junk stocks, experts said.
Nearly $2 billion worth of market value of Adani group stocks was wiped out after Swamy made the allegations. Adani Enterprises, the flagship company, is down nearly 20 per cent over three days. Anil Ambani-promoted RCom, which had seen some interest building up in the counter on the back of news that Mukesh Ambani’s telecom venture had tied up with it, saw investors yet again shunning it.
Adani, Anil Ambani, Bhushan Steel, JP group and Lanco alone account for a debt obligation of over ₹1.5 lakh crore to banks. The downturn in their business cycle and the allegations against Adani in a scenario where PSU banks are under pressure following the revelations in one of biggest loan scams has spread panic, experts said.
“The scam, PNB’s share price crash and Swamy’s allegations have caused most lenders to critically evaluate their clients and has even jammed credit in the system, which is hurting stock markets, which can rally only on fat cheque books and high availability of credit,” said a promoter of brokerage house in Mumbai.
The Sensex and Nifty, down nearly 10 per cent from their all-time high since the PNB scam came to light, are reluctant to move up.
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