Banking Sector

Alchemist

Administrator
Staff member
#42
Yesterday in news: Educomp doesn't have money to pay salaries to employees.

Educomp staff not paid salaries | Business Line

Yesterday in news: The promoters of HDIL, a housing company, can't pay interest on a home loan taken by them.

HDIL promoters default on interest payment: Indiabulls Fin - CNBC-TV18

Today's in news: Lenders of Shiv-Vani have filed a winding up petition.

Shiv-vani faces winding up for defaulting on FCCB dues - The Economic Times

This has become an everyday ritual. More and more companies are finding it difficult to service debt and are defaulting on their repayment obligations.

A couple of weeks back Crisil had warned that 1/3 rd of the companies that it tracks won't be able to service their debt obligations in this financial year. If that is going to be true, this may just be the beginning of a long series of defaults and restructuring that the Indian banking sector has to face in next few quarters.

Ratings agency Crisil has sounded an alarm on the deteriorating health of corporate India. A third of the 11,500 companies it rates may not be in a position to service debt this fiscal as the Reserve Bank of India's liquidity tightening to shore up the rupee stretches payment cycles, it said.
Crisil sounds the debt knell for India Inc; numerous downgrades likely - The Economic Times
 

Alchemist

Administrator
Staff member
#43
According to a news report in Business Standard, banks may have to restructure Rs 50000 crore worth of loans to power sector.

According to estimates, Rs 50,000-crore loans for power projects totalling over 15,000 Mw of capacity could become troubled loans.
Now, private power firms may shock banks | Business Standard

Banks are actually asking power companies to delay commissioning of projects. In the construction phase interest is accrued, but power companies don't have to repay the loans till the projects are operational.

In short, banks are more interested how good their books look than how good their loans are in reality.

To avoid this situation, many banks are learnt to have asked companies to go slow on their construction period. "Loan repayment starts only after projects become commercially operational. After that, if they do not operate because of fuel shortage, the exposure turns into bad loan. So, banks have been requesting promoters to go slow on projects," said a banker, asking not to be named.
 

magnet

Active member
#44
So which are the banks one need to keep his eye on.

HDFC bank though expensive is the safe bet because of much cleaner book I heard.

But what about others?
 

magnet

Active member
#46
In some news channel when someone asked about investment in YES bank. The expert said stay away from this stock.It has more than halved in 6 months.Also in 2008 meltdown it was available in 2 digit.Something is definitely wrong with it.:D

All of a sudden from banking license now the topic moves which banks look attractive to invest.

Axis bank I heard is asking for permission to increase its FII stake.But also I guess government hold good chunk in it so I think it can go further down.

Right now I am looking for the parameter to decide to invest in banks.I have found that in my 3 folios I have more than 10 banking stock.I want to limit it to max 3 per folio. One PSU, One private and one takeover candidate.
 

Alchemist

Administrator
Staff member
#51
Friday's bad news about SBI and today about PNB.

I started reinvesting in small chunks 2 weeks back. Now do not feel good seeing governance issues with national banks.

https://thewire.in/223684/state-bank-india-bad-loans-poor-governance-point-big-fiasco/

https://www.bloomberg.com/news/arti...-bank-drops-after-detecting-1-8-billion-fraud
There is absolutely no accountability in PSU banks.

What else can one expect from a business in which the management as well as the promoter changes every few years and the promoter is more interested in "welfare" than "wealth creation".

I have stated this earlier too - it is unlikely that a government company will create any significant wealth in the long-term. Many profitable government companies are profitable because they are either monopolies or get significant revenues from the government of India or other PSUs; and not because they are well run companies.
 
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