Yes bank finally makes provisions for ADAG and Essel group exposures

Equity Right

Yes Bank is a day late and a dollar short to make provisions, nevertheless the process has been initiated. Reliance Anil Dhirubhai Ambani Group (Reliance ADA Group) and Essel Group, are both under massive debts of Yes bank. The combined debt exposure stands at Rs 16,300 crore. Reliance ADA is subject to debt worth Rs 13,000 crores. Whereas Essel Group Company is to repay the lesser half of Rs 3,300 crores.


YES Bank has sufficient collateral for this exposure but as a consequence of dwindling investor trust, the bank has decided to make provisions for the same.

Furthermore, the Reserve Bank of India (RBI) has appointed Mr Rama Subramaniam Gandhi, the ex-deputy governor of RBI, as a board member at YES Bank. This was a precautionary step because of the stressed assets in the bank’s balance sheet.


Downgrading in Reliance ADA Group

Reliance ADA Group has already been convicted of a debt default by Court. 

The rating agency CARE and ICRA have downgraded the company’s debt instrument ratings. Companies like Reliance Capital Ltd (RCL), Reliance Commercial Finance Ltd (RCFL) and Reliance Home Finance Ltd (RHFL) are under the radar.


In the past few days, the ratings of long-term debt instrument have been downgraded substantially. The long-term bank facilities of RCFL of about Rs. 12,700 crores have been downgraded to CARE D from CARE BBB+. A ‘D’ rating means that the long term securities have defaulted or are on the verge of defaulting. Subsidiary companies of Reliance ADA group have initiated steps to repay the bank loans.


Essel Group to have trouble in paradise

Essel Group companies like Zee Entertainment Enterprises (ZEE) has recorded losses in the previous quarter. The Q4FY19 results of Zee Media Corporation reported a loss of Rs. 86.66 crores as compared to a profit of Rs. 448 crores in Q4FY18. The loss recorded was due to the one-time loss of Rs 103 crores recorded by Zee Entertainment in March 2019.


Two of the Essel Group companies have not submitted their ‘no default certificate’ to the rating agencies. Bank term loans worth Rs. 495 crores to Essel Corporate Resources as well as Rs. 400 crores to Essel Business Excellence are already under watch by the rating agencies. This would further set off the rating agency to downgrade the instruments of these companies.


Provisions by YES Bank

The provisions for the bad loans were at Rs. 5,778 crores for FY19, which includes specific loan loss provisions amounting to Rs. 1,270 crores. The contingent provisions of Rs. 2,100 crores against a stressed asset of Rs. 10,000 crores.


Stock Movement

ZEE shares have plunged about 28% in the past month of May 2019. The stock was trading at Rs. 359.5, 4.75% higher than its previous close at 2 pm on 23rd May 2019.

Reliance ADA group companies also showed a downward trend in the last month. RCL was trading at Rs. 134.05 up by 4.4% at 2 pm on 23rd May 2019.



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