Select banking stocks including Central Bank of India, Bank of Baroda and IDBI Bank were reeling under pain on Wednesday as GoFirst filed for bankruptcy. These lenders were among the major financial creditors for the low-budget carrier owned by the Wadia Group.
GoFirst owes a total of Rs 6,521 crore to five banks. Apart from the above mentioned names, Axis Bank and Deutsche Bank were the other two lenders to the company. The airline’s financial difficulties may affect lenders’ ability to recover their debts, which triggered a sell-off in these counters.
Shares of Central Bank of India, which closed at Rs 30.20 on Tuesday, fell nearly 7 per cent to Rs 28.16 on Wednesday, while Bank of Baroda fell nearly 4 per cent to Rs 188.10 as compared to closing at Rs 188.10 in the previous session. came. IDBI Bank fell 3 per cent to Rs 53.20. However, all the three lenders showed some recovery.
Cumulatively, the five banks owed Rs 6,521 crore, while investors in the above three banks lost up to Rs 7,100 crore at the initial tick. The market capitalization of these three lenders was cumulatively lower by Rs 7,096 crore. However, the beleaguered airline had not defaulted on any of these dues as of the end of April, GoFirst said in the filing, Reuters reported.
Central Bank of India has the highest exposure of Rs 1,561.6 crore to GoFirst, followed by Bank of Baroda with Rs 1,429.82 crore. Deutsche Bank has an exposure of Rs 1,320 crore. However, IDBI Bank’s exposure to Go First is much lower at Rs 58.58 crore. Axis Bank, which has an exposure of Rs 30 crore to the defunct airlines, was trading flat.
Wadia Group-owned GoFirst on Tuesday said it has filed for insolvency resolution and will now continue to meet financial obligations, blaming US firm Pratt & Whitney’s ‘faulty engines’ for the grounding of 50 per cent of its fleet. Can’t keep All GoFirst flights were suspended for May 3-5.
In the financial year 2022, GoFirst has suffered the highest ever annual financial loss. For several months, the airline lost significant business in an otherwise buoyant domestic aviation market, adding to the carrier’s woes. The company, which had been looking for its listing since 2015, postponed its IPO several times until it finally filed for bankruptcy.