After the government introduced mega capital infusion scheme for public sector banks (PSBs), the industry chamber Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its latest report has stated that the change in market perception of PSBs has the potential to fetch the government much higher values than that envisaged in the bank support plan via stake divestment in public sector undertaking banks.
According to the report, the dilution of government equity to 52% in state-owned banks under the recapitalisation plan can fetch valuation much higher than the estimated potential of Rs 58,000 crore. It has highlighted that as public sector undertaking banks have been given over-weightage following the government announcement of capital infusion, their valuations have already gone up between 20-30% in the first few days, even before unveiling of details of the recapitalisation bonds and the reform roadmap.
ASSOCHAM further said that as the details emerge in the coming few weeks and months, these stocks, particularly of the larger banks can easily move up by another 30-40%, taking their market capitalization commensurately high. This would surely mean, that if the banks are able to encash the sweet spot, they can easily raise much more than Rs 58,000 crore. It also said once bank lending begins to pick up, there would be consequent advantages by way of higher economic growth and tax buoyancy.