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Bhushan Steel Resolved - A New Beginning for the Indian Economy?
May 25, 2018

Talking about super investors, some of them are betting on the revival of the banking sector. With bad loans of around Rs 7.3 trillion, India's banking sector is going through a very rough phase.

The biggest losers have been public sector banks with a bad loan exposure of around Rs 6.1 trillion.

However, with the Insolvency and Bankruptcy Code (IBC), there is hope of some write backs. Last year, the RBI disclosed the top 12 loan defaulters accounting for around 25% of the total bad loans.

As the chart shows, the biggest defaulter was Bhushan Steel with bad loans of Rs 559 billion.

However, there is some good news for the banking sector. Tata Steel has emerged as a buyer of Bhushan Steel under IBC.

It has agreed to pay around Rs 352 billion to Bhushan Steel's lenders for a stake of 72.6%. This implies a haircut of around 37% for banks.

We believe, this can be a big boon for the banking sector and the Indian economy. This is expected to bring consolidation across sectors with weaker players being acquired by larger players.

Further, this will also help banks recover their bad loans to an extent and hence bring back credit growth.

We strongly believe, this can be a solution to India's 'Twin Balance Sheet' problem.

We recently recommended a company to our Smart Money Secrets subscribers which is expected to benefit immensely from the Bhushan Steel's recovery.

You can get access to Smart Money Secrets here...

Data Source: SBI Ecowrap, RBI

This Chart Of The Day was published in The 5 Minute WrapUp - A Store Manager Guided Me to This Stock with 68% Upside

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