Godmine Update – 03/05/2019

Jet Airways, IL&FS & its impact

Jet Airways is gone and it is quite difficult to revive this company. This Government has not helped any industrialist and this case is not different. The policy is clear either bail out yourself or shut down your business. Sell off the assets and repay. In most cases, Lenders take over the assets and sell it off through NCLT auction. IL&FS, Essel Group issues are as on today under the cover and the ghosts will come out once elections are over. The markets are also ignoring the defaults and rollovers of FMPs by HDFC AMC and Kotak Mahindra Bank. These are credibility issues and if some reputed institutions do not pay up on time, investors will lose faith in Mutual funds. So two issues that the NPA cycle is not yet over and that there are credibility issues that will come up wrt mutual funds and Asset Management houses.

As per RBI, banks will need to give details regarding provisions made and to be made for the IL&FS exposure. It is a huge exposure and one cannot avoid the cuts. RBI has asked banks to declare IL&FS exposure with results. It means all banks will need to show their exposure in the current results. Those like HDFC Bank, who declared may have to send a revised result with exposure to IL&FS, if any. This is a big development and IL&FS is a huge exposure that could result in weakness in results for the next two years for many banks.


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