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Investors Brace for Crucial Week With Yes Earnings, Lodha Bonds

Investors will get crucial clarity in the coming days on the health of India’s $1.75 trillion financial sector.

Investors Brace for Crucial Week With Yes Earnings, Lodha Bonds
People watch business news on a monitor outside Bombay Stock Exchange (BSE) in Mumbai, India. (Photographer: Adeel Halim/Bloomberg News)

(Bloomberg) -- Investors will get crucial clarity in the coming days on the health of India’s 130 trillion rupee ($1.75 trillion) financial sector.

The nation’s biggest developer is racing to refinance $324 million debt maturing March 13, and any stumble could lead to one of India’s largest offshore bond defaults. Then, a day later, Yes Bank Ltd. is due to announce its results, which would shed light on what pushed authorities to seize the lender last week. Finally, March 17 is the deadline for Vodafone Group Plc’s struggling Indian unit to pay $4 billion in overdue fees to the government -- if it opts for bankruptcy instead, the impact will ripple across the financial system.

Prime Minister Narendra Modi can ill afford more stress; his economy is set to decelerate to an 11-year low and the coronavirus outbreak threatens to delay a revival. India’s central bank has come out twice in less than a year in a rare show of assurance to depositors that the nation’s banking system is safe.

“This is an important week for India in terms of the potential revival of the economy, given the close interlinkages between the financial and corporate sector,” said Madhavi Arora, an economist at Edelweiss Securities Ltd. in Mumbai. “Some light on the resolution of corporate stress this week would be crucial in determining the banking and non-banking financial system’s health, at a time when domestic growth is fragile and credit conditions are tight.”

Here are details of the key events:

Lodha Repayment

Lodha Developers International Ltd. last week fell short of the top end of a fundraising range in a pivotal deal to refinance its existing note due March 13, and was set to launch a tap this week. It also needs to meet conditions, including setting aside cash and getting consent from some of the group’s other lenders, before it can use the proceeds of the new bond. Moody’s Investors Service had earlier warned that Lodha didn’t have an alternate plan to repay, and that any failure to meet the complicated conditions would “likely lead to a default.”

Yes Bank Earnings

Yes Bank, which was due to report results for the October-December quarter last month, delayed the announcement to March 14 saying it was busy trying to raise capital. In the interim, Yes Bank’s worsening liquidity condition and lack of commitments from potential investors forced the central bank to overthrow Yes Bank’s board and effect the nation’s biggest bank rescue that could wipe out some bondholders. The extent of the deterioration in its financials will be clear on Saturday.

Vodafone Dues

Vodafone Idea Ltd., which has more than $14 billion in net debt and hasn’t reported a profit in more than two years, must pay India’s government $4 billion by March 17 or risk contempt of court proceedings. In December, Chairman Kumar Mangalam Birla warned of a potential collapse in the absence of any relief over the payment; British partner Vodafone has completely written off the value of its 45% holdings in the venture and signaled it isn’t keen to invest more. Banks will “have to pay the price” if any telecom firm files for bankruptcy, Rajnish Kumar, chairman of State Bank of India, the nation’s largest lender, said last month. India’s government may clear a bailout package this week, the Times of India reported, without saying where it got the information.

--With assistance from P R Sanjai and Bijou George.

To contact the reporter on this story: Suvashree Ghosh in Mumbai at sghosh186@bloomberg.net

To contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net, Jeanette Rodrigues, Anto Antony

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