Scrips of DPC lenders dip after termination notice

Aarti Shetty

Mumbai, May 22: SCRIP prices of the State Bank of India (SBI), ICICI and the Industrial Development Bank of India (IDBI) have dipped after the Dabhol Power Corporation (DPC) gave its preliminary termination notice last Saturday.

On Tuesday, SBI’s share price on the Stock Exchange, Mumbai (BSE) quoted at Rs 228.10, down from Friday’s level of Rs 236.20.

The scrips of ICICI and IDBI were seen at Rs 83.95 and Rs 24.80 down from Friday’s quotes at Rs 89.40 and Rs 27.15 respectively. SBI and local financial institutions have both fund-based and non-fund based exposures to DPC. This is in main to the phase-2 of the project, which does not have a counter-guarantee from the Centre. In the project is scrapped, only a new buyer can salvage the situation on a reworked power purchase agreement (PPA). Domestic lenders have an exposure in excess of Rs 4,000 crore to DPC. The termination of the project is expected to reflect badly on loan-portfolios. This in turn has made markets wary of the stocks of these financial intermediaries. It might be recalled that international lenders have already started a review on the impact of the termination of the DPC project on their loan-books, and the provisioning required. Local banks and financial institutions have been lobbying hard to salvage the project. Domestic-lenders led by IDBI are leaving no stone unturned to save the project. At the same time, banks with exposure to both Phase-1 and Phase-2 are now examining the extent to which they can limit their losses in the event of the project’s termination. It is widely believed that both SBI and IDBI will also post lower net-profits for the last fiscal. SBI is seen posting a lower net-profit on account of its VRS charges, and interest on IMDs with IDBI taking a hit on higher provisioning as a result of its NPAs.