SBI’s share in Adani’s debt burden. Should you trade in SBI stocks after the Adani saga?

SBI share trading in the face of the Adani fiasco.

SBI Stocks after Adani shares

The Hindenburg report threw a curveball to the Adani Group, whose shares are in free fall after the controversial report hit the streets. As more discoveries are being made, the contribution of large public sector banks, like SBI, to Adani Group’s overall debt has come under the scanner. This has affected the share prices of public sector banks, and investors are in a fix.

Related - 3 Adani scrips under the ASM framework. Here's what you should know

India’s largest public sector bank, State Bank of India (SBI), has offered loans to the tune of $2.6 billion to the Adani Group. As the conglomerate’s aggregate market capitalisation has eroded by more than $100 billion in a week, investors are worried about the default risk that the bank might face. A possible default would hamper the bank’s profitability. This sentiment is making investors jittery.

The Reserve Bank of India (RBI) asked public sector banks to disclose the overall loan they have offered to the Adani Group. As other banks disclose their loan portfolios, SBI has reported more than $200 million of debt to the group’s companies.

Should investors be worried?

Talking about SBI’s contribution to Adani Group’s debt, the bank's chairman stated that the bank did not expect any repayment default from Adani. He further went on to clarify that the bank’s non-fund exposure in the group is restricted to performance guarantees and letters of credit. As such, there’s nothing to fear.

SBI’s Q3 performance

Just days before, SBI published its quarterly reports for the third quarter of the financial year 2022-23. The report showed impressive performance by the bank. Have a look –

  • Net profit jumped 68.5% to Rs.14,205 crores.
  • Net interest income jumped 24% to stand at Rs.38,069 crores.
  • The net interest margin was reported at 3.69%

The bank’s performance far exceeded analyst estimates, driving a positive sentiment for the company’s stock.

What do brokerage houses say?

After the Adani debacle and SBI’s share in the group’s debt portfolio, brokerage houses have come up with their opinion and rating on SBI’s stocks. Here’s what experts have to say –

  • ‘Buy’ Rating

Many brokerage houses have put a ‘Buy’ call on SBI scrip with a target price ranging from Rs.700 to Rs.788.

  • ‘Overweight’ Rating

A few experts have rated the stock ‘overweight’ and have established a target price of Rs.715 and Rs.720.

  • ‘Outperform’ rating

Some experts have given the ‘outperform’ rating on the stock with a target price of Rs.695.

What should investors do?

SBI’s stock price has delivered a return of 2% in the last year compared to Nifty50's return of 2.9%. The bank is a large-cap player that has established itself in the market. Regarding the Adani Group, the conglomerate has fingers in many pies. Though it has come under the scanner, the group has the potential to pull through the storm.

So, if you are in it long-term, you can buy or stay invested in SBI stocks. You can also assess the market and then take your decision.

Related - Find out whether you should stay invested in Adani after the Hindenburg allegations


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