State Bank of India’s exposure to the embattled Adani Group is “well manageable” given its strong cushion of provisioning reserves, CreditSights, a unit of Fitch Ratings, said in a note on Tuesday.
SBI’s total exposure to the conglomerate was 0.9% of its total loan book, Chairman Dinesh Kumar Khara said on Friday.
CreditSights noted that the nation’s largest lender has a reserve buffer of about $4.08 billion or about 1% of net loans.
He added that SBI also has the ability to generate pre-provisioning earnings or operating income before factoring in future bad debt provisions.
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In addition, most of the bank’s exposure to the Adani Group was collateralized by completed, cash-generating assets, while the rest of the exposure was in projects under construction as scheduled, CreditSights said.
Khara said the Adani Group’s exposure was of no concern to the bank and that he saw no challenge in the conglomerate’s ability to meet its debt obligations.
Investors have been concerned about several banks’ exposure to the group since late January, when US short seller Hindenburg Research alleged the conglomerate’s misuse of offshore tax havens and stock manipulation.
The group rejected the criticism and denied wrongdoing in detailed rebuttals.
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To allay concerns, the Reserve Bank of India (RBI), as the country’s banking regulator, has said that the Indian banking system remains resilient and stable.
Although SBI has some unfunded exposure, it includes letters of credit and bank guarantees that are not related to acquisition or capital raising activities, CreditSights said.
Last week, SBI posted a 68.5% rise in net profit for the October-December quarter, buoyed by better interest income and a drop in loan-loss provisions.
CreditSights maintains a “market performance” rating on SBI.
