BoB makes ₹500 cr provisions against Go First exposure; stock down

Shares of Bank of Baroda slipped 0.80% to ₹185 on the National Stock Exchange (NSE) today despite the company recording the highest-ever quarterly and annual profit of ₹4,775 crore, up 168% year-on-year, and ₹14,110 crore, up 94% YoY.

State-owned lender Bank of Baroda's managing director and CEO on Tuesday said the bank made a provision of ₹500 crore against its exposure to the cash-strapped airline Go First, whose plea for insolvency has been admitted by the National Company Law Tribunal (NCLT).

According to the Wadia group-led airline's insolvency filing, apart from the Bank of Baroda, its creditors include IDBI Bank and Deutsche Bank. Some estimates suggest the airline's total liabilities and dues to creditors stand at over ₹11,000 crore.

In a huge relief to Wadia group-led Go First, the Delhi bench of the NCLT on May 10 admitted the airline's plea for voluntary insolvency and has granted protection under moratorium from the recovery of its planes by foreign lessors.

The tribunal also ordered the initiation of a Corporate Insolvency Resolution Process (CIRP) and the appointment of a resolution professional, who will maintain the airline's status as a "going concern".

Further, the airline is mandated to deposit ₹5 crore with the resolution professional to meet the expenses. The NCLT decision came after Nusli Wadia-controlled Go First airline sought voluntary insolvency proceedings and the imposition of an interim moratorium under the Insolvency and Bankruptcy Code (IBC).

A Go First lessor has, meanwhile, moved the Delhi High Court seeking an order to the authorities to release its planes. Before this, two lessors had already moved the appellate tribunal opposing the lower tribunal's decision. The decision on the matter is expected next week.

Bank of Baroda, in a stock exchange filing yesterday, said the robust growth in profitability was supported by healthy net interest income (NII) growth of 33.8% and 26.8% for Q4 FY23 and FY23, respectively.

The gross NPAs of the bank reduced by 32% YoY to ₹36,764 crore in Q4FY23 and the gross NPA ratio improved to 3.79% in Q4FY23 from 6.61% in Q4FY22. The provision coverage ratio of the bank also stood at 92.43% and the slippage ratio declined to 1.02% for Q4FY23.

BOB said its global advances registered a strong YoY growth of 18.5% in Q4FY23 led by robust retail loan book growth. Bank's organic retail advances grew 26.8%, driven by growth in high-focus areas such as auto loans (24.4%), home loans (19.5%), personal loans (101.5%), mortgage loans (18.0%), education loans (21.8%). The public lender's total business stood at ₹21,73,236 crore as of March 31, 2023, registering a growth of 16.6% YoY. It has also recommended declaring a dividend of ₹5.5 per share, subject to requisite approval from its board.