What's Worrying Share Holders Of ICICI Bank?

Business

oi-Sunil

By Sunil Fernandes

Updated: Friday, June 12, 2015, 10:09 [IST]

Since hitting a peak of Rs 393 in early Jan this year, ICICI Bank shares are down a good 25 per cent from these highs. The Sensex is currently down only 12 per cent from its peak levels.

Each time we hear rumours of J P Associates or its subsidiaries defaulting, ICICI Bank shares keep falling. In fact, the bank has a substantial exposure to the J P Associates Group in the form of loans, which is a little worrisome for ICICI Bank shareholders.

At least until last year there were reports of exposure to the tune of Rs 12,000 plus crores. We do not have accurate figures of what the loan amount stands now, but, it is again likely to be substantial.

Early this month when J P Associates was in the news for rumours of debt default, ICICI Bank shares also began falling. The company said it "categorically denied" rumours related to a share revocation and defaults in repayment obligations, which caused shares in the parent company to plunge as much as 32 per cent.

In fact, the J P Associates group and its subsidiaries have loans to the tune of Rs 65,000 crores. ICICI Bank, IDBI Bank and State Bank of India have biggest exposure to the group.

Any default could worry investors in the shares of these three banks because the exposure is really large. The amount in question and the loans on the books of J P Associates and its subsidiaries is gigantic by any stretch of imagination.

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