UBS: Indian Banks are facing risk of $15 billion telecom dues

According to the UBS Group AG, due to the Supreme Court’s rejection of the appeal made by wireless carriers to review $13 billion they owe to the government raises risks for lenders to the companies. These pending payment of the dues disturb the telecom operators’ cash flows, especially those of Vodafone Group Plc’s India venture.

As per the October verdict, Vodafone Idea Ltd. is required to pay $4 billion, while Bharti Airtel Ltd. will have to pay $3 billion by the end of next week. The court will not also rehear petitions seeking relaxations on the deadline, as it has rejected it.

“IndusInd, YES, SBI appears to have relatively high exposure to Vodafone Idea,” analysts Vishal Goyal and Ishank Kumar wrote in a note. For the banking system, loans outstanding to the telecom sector were ₹1.1 trillion or 1.3% of total loans in September, the note added.

IndusInd Bank, Yes Bank and Punjab National Bank are sectors with least preferred stocks, according to the UBS note. The investment bank remains positive on Axis Bank Ltd., ICICI Bank Ltd. and HDFC Bank Ltd.

However, Still there are Brokers and UBS, who is hopeing that government would provide some relief to the telecom companies via staggered payments or waiver of interest and penalty.