The Supreme Court's rejection of the appeal by Indian telecom operators to review the AGR verdict could pose a risk to the lenders of these companies.
According to UBS Group AG, the payment towards dues may erode the cash flow of telecom operators, especially of Vodafone Idea, worst hit by the 24 October AGR verdict.
As the 24 January deadline to pay the dues approaches, there are fresh concerns that the inability to generate positive revenue by telcos amid mounting dues could also hurt the asset quality of their lenders.
As per Communications Minister Ravi Shankar Prasad's reply to the Parliament in December, telecom companies collectively owe Rs 1.47 lakh crore to the government.
"IndusInd, YES, SBI appears to have relatively high exposure to Vodafone Idea," UBS analysts Vishal Goyal and Ishank Kumar wrote in a note. The note further said that loans outstanding to the telecom sector in the banking system were Rs 1.1 lakh crore, accounting for 1.3 percent of their total loans as of September.
IndusInd Bank, Yes Bank and Punjab National Bank are the least preferred banking stocks for the investment bank while it remains positive on Axis Bank Ltd., ICICI Bank Ltd. and HDFC Bank Ltd.
Shares of Yes Bank fell nearly 7 percent to a low of Rs 37 on Friday after Moody's placed the private lender's long-term foreign-currency issuer rating of B2 under review over the uncertainty of its exposure to telecom companies seeking relief from AGR verdict.
Shares of SBI, IndusInd Bank and PNB slumped 1 to 3 percent in trade on Friday.