Adani connection? Nifty PSU Bank index jumps 5%

Nifty PSU Bank index surged nearly 5% in intraday trade on the National Stock Exchange (NSE) on Friday amid easing concerns about the Adani Group’s debt repayment capabilities after the Gautam Adani-led conglomerate raised ₹15,446 crore by selling minority stakes in four of the listed companies. The banking stocks, which were reeling under pressure amid concerns over exposure to the Adani group, witnessed sharp rebound, in sync with the conglomerates shares, with index heavyweights State Bank of India, Bank of Baroda, Punjab National Bank, Union Bank of India, and others rallying up to 7% on the NSE.

Domestic banks have an exposure of ₹81,200 crore to port-to-power conglomerate, with State Bank of India (SBI), the country’s largest lender, leading the pack with ₹27,000 crore. Among other big players, Bank of Baroda (BoB), Punjab National Bank (PNB), Axis Bank, and IndusInd Bank have also exposure to various entities of the Adani group. As per foreign brokerage house CLSA, Indian banks’ exposure is 0.55% of system loans, but their share is the biggest at 40% of total group borrowing as of FY22. 

At 12:30 pm, Nifty PSU Bank index was up 5%, with all state-owned banks trading in the green zone, while Union Bank of India topped the chart with a 7% gain. While SBI was up 5.3%, BoB and PNB climbed 4.7%, and 3.7%, respectively. Among others, UCO Bank, Maharashtra Bank, Indian Bank, Bank of India, Indian Overseas Bank, Central Bank, and Canara Bank were trading higher in the range of 5-7%.

On a year-to-date basis, Nifty PSU Bank index fell over 9% amid investors' concerns about the public lenders’ exposures to the Adani group amid the rout triggered by the U.S. short-seller Hindenburg Research’s critical report on the conglomerate, which came out on January 24, 2023. The report sparked a sell-off in the group shares resulting in a cumulative market loss of around ₹12 lakh crore, with most of the listed entities hitting their 52-week lows.

However, shares of Adani group companies saw some recovery in the last three sessions amid a report that the Gautam Adani-led conglomerate is planning to prepay or repay share-backed loans worth $690 million to $790 million by March end. The port-to-power group has already repaid more than ₹12,000 crore to bondholders and mutual funds in the recent past and plans to repay another ₹1,200-1,400 crore to SBI MF against commercial papers maturing in March.

On Friday, Adani stocks opened higher after the conglomerate sold minority stakes in four of the listed companies to American equity investment boutique GQG Partners for ₹15,446 crore. The investment by GQG is the first major capital infusion in Adani Group since the release of the Hindenburg Research report on January 24, 2023.

Listed on the Australian Stock Exchange, GQG Partners has acquired a 3.4% stake in Adani Enterprises for about ₹5,460 crore, 4.1% in Adani Ports for ₹5,282 crore, 2.5% in Adani Transmission for ₹1,898 crore, and a 3.5% shares in Adani Green Energy for ₹2,806 crore.