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SBI seeks early buyout of DPC stake

State Bank of India is pushing prospective buyers for a speedy buyout of Enron's stake in a local power project to which it has lent a large sum, a senior official there said on Tuesday.

But he said SBI, India's largest commercial bank, was ready to make provisions on its loans totalling Rs 17.49 billion to Dabhol Power Company if a buyer is not found within four months at the financial year end.

Enron has been looking since August for a buyer for its stake in the troubled Dabhol project, which runs a 2,184 megawatt power project in the western state of Maharashtra.

The $2.9 billion plant, in which Enron holds a 65 per cent stake, has been idle since June following protracted disputes over tariffs charged to its sole consumer, the Maharashtra State Electricity Board.

"Negotiations are on to find a buyer and we are hopeful that a deal will go through before the end of the current financial year," said the SBI official, who asked not to be identified.

"There are two bidders -- Tata Power and BSES Ltd -- and we are pushing for an early solution," he said.

SHARES AFFECTED

Indian banks and financial institutions, which include Industrial Development Bank of India, ICICI Ltd and IFCI Ltd, have lent or guaranteed loans totalling $1.4 billion to Dabhol.

Shares of SBI, IDBI, ICICI and IFCI have fallen since Enron filed for bankruptcy earlier this week amid fears that these lenders may have to face defaults on loans given to the local unit, which has not generated any revenues since June.

Under Indian banking regulations, loans are classified as non-performing assets if interest is not paid within six months of the due date. Banks have to set aside profits against such NPAs.

Bankers said Dabhol has serviced its loans up to September 30.

The stocks of IDBI, SBI, ICICI and IFCI have fallen between 4.3 per cent and 7.7 per cent in the past two trading sessions as the benchmark 30-share Bombay index rose one per cent.

"SBI will have to provide a minimum 10 per cent provisioning against such assets in the current year to March," analysts Punit Srivastava and Prafull Rai of Enam Securities said in a research note.

The report said SBI's profit could be hit by Rs 1 billion in the current year, impacting earnings by Rs 1.9 per share. SBI reported a net profit of Rs 12.24 billion for the six months ended September.

The report said IDBI and ICICI also have significant exposures to Dabhol and their earnings may be substantially hit due to increased provisions towards the project.

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