ICICI Securities: Supreme Court’s ‘Interest On Interest’ Waiver Case - Drifting Away From Base Case Assumptions
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ICICI Securities Report
Discussions, observations and interim order in the last two hearings on ‘interest on interest’ waiver case in Supreme Court (SC) are drifting away from our (and street’s) base case assumption of the least likelihood of waiver of ‘interest on interest’.
Also, SC seems to be seeking more specific relief beyond a restructuring framework for a few sectors under litigation.
However, further hearing is deferred to September 28, 2020, and till the time final judgement is delivered, uncertainty and overhang will continue.
Impact analysis - incremental burden of Rs 75-80 billion (7 basis points of loans; less than 4% of pre-provision operating profit).
We have, to the best of our assessment, tried to quantify the impact of waiver of ‘interest on interest’ at an industry as well as financier level working around with few key publicly disclosed variables - namely moratorium proportion, lending yields and product tenure.
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