Go First’s bankruptcy effect: Bank of Baroda, Central Bank, IDBI Bank shares plunge up to 7%; Investors lose Rs 7,100 crore

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Select banking stocks, including Central Bank of India, Bank of Baroda and IDBI Bank were reeling under pain on Wednesday as Go First filed for bankruptcy. These lenders were among the leading financial creditors for the Wadia Group-owned low-budget carrier.

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Go First owes five banks a total of Rs 6,521 crore. Other than the above-mentioned names, Axis Bank and Deutsche Bank were the other two lenders of the company. The airline’s financial difficulties may impact the lenders’ ability to recover their loans, which triggered a sell-off in these counters.

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Shares of Central Bank of India, which settled at Rs 30.20 on Tuesday, tumbled about 7 per cent to Rs 28.16 on Wednesday, while Bank of Baroda plunged almost 4 per cent to Rs 188.10 compared to its close at Rs 188.10 in the previous session. IDBI Bank shed 3 per cent to Rs 53.20. However, all the three lenders staged some recovery.

Cumulatively, the five banks owed Rs 6,521 crore, while investors of the aforementioned three banks notionally lost up to Rs 7,100 crore at the opening tick. The market capitalisation of these three lenders was cumulatively down by Rs 7,096 crore. However, the embattled airline had not defaulted on any of these dues as of the end of April, Go First said in the filing, reported Reuters.

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Central Bank of India has the highest exposure of Rs 1,561.6 crore in Go First, while the Bank of Baroda has an exposure of Rs 1,429.82 crore. Deutsche Bank has an exposure of Rs 1,320 crore. However, IDBI Bank’s exposure in Go First is quite small at Rs 58.58 crore. Axis Bank, which has an exposure of Rs 30 crore in the defunct airlines, was trading flat.

Wadia group-owned Go First on Tuesday said it has filed for insolvency resolution and can no longer continue to meet financial obligations, blaming US company Pratt & Whitney’s ‘faulty engines’ for grounding 50 per cent of its fleet. All flights of Go First were suspended for May 3-5.

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Go First made its highest annual financial loss to date in fiscal 2022. For several months, the airline lost significant business in an otherwise upbeat domestic aviation market, adding to the woes of the carrier. The company, which was looking for its listing since 2015, deferred its IPO quite a few times until it finally filed for insolvency.