Indian banks with exposure to the Adani Group were among those that saw the worst declines in their market capitalisation in Q4 FY23, after US-based short seller Hindenburg’s report targeted the infrastructure and energy conglomerate.

Among banks that lost the most market capitalisation, Bank of Baroda and Axis Bank saw a decline of 9.1 per cent and 8 per cent, respectively, S&P Market Intelligence said in a note.

Punjab National Bank fell two spots to tenth place on S&P Global Market Intelligence’s ranking of India’s largest banks by market capitalisation. The market cap plunged 17.5 per cent to $6.25 billion, the biggest decline among the top 10 banks. State Bank of India saw a decline of 14.7 per cent followed by IndusInd Bank with a 12.4 per cent fall.

Adani impact

Hindenburg Research’s January 24 report had alleged that the Adani Group has engaged in stock manipulation and accounting fraud scheme over the course of decades. The report led to a fall in Indian equities even as the Group denied the allegations.

Also read: Indian banks will maintain strong earnings momentum in Q4 FY23: S&P Global Market Intelligence

The benchmark Sensex fell 3 per cent for the quarter whereas Nifty 50 declined 4.1 per cent. Nifty Bank Index fell 5.5 per cent. SBI, IndusInd Bank, and Axis Bank had then disclosed that their exposure was below 1 per cent of total advances whereas Bank of Baroda said its exposure is 25 per cent of RBI’s prescribed limit.

“Based on the financial metrics of banks with known exposure to the Adani Group, industry experts believe that any fallout from the Group’s troubles does not pose any significant credit risk to the Indian banking sector,” S&P said.

An expert panel of the Supreme Court is “reviewing and assessing the existing regulatory framework and dealing with alleged contravention of laws pertaining to the securities market. We expect its finding and order to bring finality to these allegations,” an Adani Group spokesperson told Market Intelligence.

Of the top 20 Indian banks by market cap, 17 registered a decline, including those with no stated exposure to the Adani Group. The market cap of Indian Overseas Bank and Central Bank of India remained the same but that for Indian Bank rose marginally by 1.1 per cent to $4.38 billion.

In addition to the concerns around Adani Group exposure, banking stocks have been under pressure due to global macro uncertainty, banking crisis spill-over and expectations of moderation in growth due to rising interest rates. RBI has cumulatively raised the key policy rate by 250 bps since May 2022.

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