05 May, 2025
PSU banks trade mixed post SC verdict on JSW Steel; should you buy the dip?
State Bank of India (SBI), Indian Overseas Bank (IOB), Uco Bank, Central Bank of India and Union Bank of India slipped between 1 per cent to 2 per cent in intraday deals on Monday
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PSU banks trade mixed on Monday post the SC verdict on JSW Steel, Bhushan Steel
Shares of select public sector banks (PSBs) came under pressure, down by up to 2 per cent on the National Stock Exchange (NSE) in Monday’s intra-day trade, after the Supreme Court on Friday rejected JSW Steel’s 2019 resolution plan for Bhushan Power and Steel (BPSL), declaring it as illegal, and ordered the liquidation of BPSL’s assets.
State Bank of India (SBI), Indian Overseas Bank (IOB), Uco Bank, Central Bank of India and Union Bank of India slipped between 1 per cent to 2 per cent in intraday deals on Monday. However, Canara Bank, Indian Bank and Bank of Baroda moved up 1 per cent, while Punjab National Bank (PNB) remained flat on the NSE.
At 09:43 am; Nifty PSU Bank index was down 0.30 per cent, as compared to 0.39 per cent decline in the Nifty 50. However, in the past one month, PSBs have gained in the range of 5 per cent to 12 per cent, shows data. In comparison, the Nifty 50 moved up 10.5 per cent.
Gaurang Shah, senior vice-president at Geojit Financial Services suggests a lot of negative news as regards the development is already built in to the stock prices of these PSU banks.
I don't think that the exposure amount is so big that it will be a long-term negative for the banks involved. Whatever PSU banks had to react, they did so last week. Among the lot, State Bank of India (SBI), Bank of Baroda (BoB), Bank of India, Canara Bank, Punjab National Bank (PNB) and Indian Bank are our recommendations on the fundamental side. As things stand, they can see an upside of 15 - 20 per cent (on a conservative basis) in the next one year," Shah said.
As per the plan, JSW had offered ₹19,350 crore to financial creditors and ₹350 crore to operational creditors of Bhushan Steel and power Limited (BSPL), which was paid in March 2021.
SBI, PNB, Bank of Baroda, Indian Bank, Canara Bank, and IOB were among the major lenders to BPSL, which was one of the “dirty dozen” companies referred to in the corporate insolvency resolution process, under the IBC, in 2017 by the Reserve Bank of India (RBI).
Banks will have to make provisions for the amounts recovered because the funds have to be returned, said bankers Business Standard spoke to.
According to lawyers handling the Insolvency and Bankruptcy Code (IBC), financial creditors typically provide an undertaking to the resolution professional of the corporate debtor, agreeing to return the recoveries made through resolution if discrepancies in the resolution plan arise later.
Meanwhile, JSW Steel in exchange filing said they are yet to receive the formal copy of the Order to understand the grounds for rejection in detail and its implications. “Once we receive the Order and are able to review the same along with our legal advisors, we will decide on our further course of action,” JSW Steel said.
At this stage, the lenders are awaiting the detailed order. After they get it, they will assess the implications and decide on the next step.
G Chokkalingam, founder and head of research at Equinomics Research, too, believes that most of the banks saw a knee-jerk reaction to the development last week.
BSPL will eventually find a new suitor, which should address concerns. Though stocks of these banks reacted last week to the development, most of the negatives are already in the prices. One can buy PSU banks on a dip from a long-term horizon. I like SBI and Bank of Maharashtra in the PSU banking space," he said
Originally published on Business Standard
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