The Associated Chambers of Commerce & Industry of India
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PSU banks in sweet spots; market mop up can well exceed Rs 58K crore: ASSOCHAM

 

Sunday, October 29, 2017

New Delhi, October 28, 2017: If the change of perception for PSU banks, post the mega capital infusion scheme is any indication, dilution of government equity, up to 52 per cent in the state-owned lenders can fetch valuation much higher than the estimated potential of Rs 58,000 crore as provided in the Rs 2,11,000 crore re-capitalisation plan, an ASSOCHAM report has said.
 
“As PSU banks have been given over-weightage following the government announcement of capital infusion, their valuations have already gone up between 20-30 per cent in the first few days, even before unveiling of  details of the recapitalization bonds and the reform roadmap. As the details emerge in the coming few weeks and months, these stocks, particularly of the larger banks can easily move up by another 30-40 per cent, taking their market capitalization commensurately high. This would surely mean, that if the banks are able to encash the sweet spot, they can easily raise much more than Rs 58,000 crore,” said the ASSOCHAM report.
 
It said to the extent, the market is ready to give a premium on the PSU banks, notwithstanding some profit-taking, post October 24, the government can then tweak the projects bonds and reduce their size below Rs 1,35,000 crore , bringing down the interest burden on the budget and avert pressure on the fisc.
 
The government holding in several banks is still well above the 52 per cent mark, which had been decided to be maintained.  “It is a different matter that the money so raised by government dilution would accrue to the banks and not the exchequer. All the same , all this financial revamp would ultimately lead to a huge benefit to the government itself , in terms of higher market capitalisation. After all, the largest shareholder would still be the Government of India," said the ASSOCHAM Secretary General Mr D S Rawat.
 
Besides, the chamber report said that once the uptick in lending resumes, there would be consequent advantages by way of higher economic growth and tax buoyancy.
 
 
About ASSOCHAM:
ASSOCHAM initiated its endeavour of value creation for Indian industry in 1920. It was established by promoter Chambers, representing all regions of India. Having in its fold over 400 Chambers and Trade Associations, and serving over 4.5 lakh members across India. ASSOCHAM has emerged as the fountainhead of Knowledge for Indian industry, which is all set to redefine the dynamics of growth and development in the Knowledge Based Economy. More information available on www.assocham.org
 
For further details, please contact:
 
Manju Negi
AVDHESH SHARMA   
ASSOCHAM
ASSOCHAM   
011-46550509; +919810910911
011-46550508; +918527639419
 

 

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