Bank of Baroda’s ₹5,700 crore NMC settlement to weigh on FY27 profitability
MUMBAI: State-owned Bank of Baroda has agreed to pay $600 million or thereabouts ₹5,700 crore in an out-of-court settlement to resolve years-long litigation in connection with the collapse of United Arab Emirates (UAE)-based healthcare provider NMC Health.
The one-time payment is equivalent to approximately 28% of the lender’s financial year 2026 (FY26) net profit. ₹The ₹20,021 crore revenue is expected to negatively impact earnings in the coming quarters, although analysts say this is unlikely to impact the bank’s long-term growth prospects or capital position.
“The bank did not make provision for the settlement and treated it as a contingent liability, which means there is a fresh hit in the company’s profit and loss account,” said Akshay Tiwari, vice president and research analyst at Asit C Mehta Investment Intermediates.
The settlement amount is likely to impact first or second quarter earnings and will also put pressure on FY27 profitability, said Sunny Agrawal, head of fundamental research at SBI Securities. However, since this is a one-time event, the bank is expected to continue growing in double digits and its annual profit potential is expected to reach $200 thousand. ₹Agrawal added 20,000 crore and above.
“Bank of Baroda continues to have a healthy capital position and the deal is unlikely to impact long-term financial stability or growth prospects,” said Bonanza research analyst Abhinav Tiwari.
An email sent to Bank of Baroda early hours on friday remained unanswered until press time.
What was the case about?
According to Bank of Baroda’s FY26 annual report, the directors dealing with the insolvency of NMC Group had filed a lawsuit against Bank of Baroda and former NMC executive Prashant Manghat, former promoter of NMC Group BR Shetty, before Abu Dhabi Global Market and courts in the UK. The directors claimed that NMC Group collapsed due to fraud committed by some shareholders, senior management and employees between 2012 and 2020.
The executives had also alleged that Bank of Baroda’s Abu Dhabi branch helped process financing transactions that allowed NMC Health and related entities to hide their true financial status, according to reports. They also alleged that the bank, along with several other lenders, failed to adequately carry out anti-money laundering, know-your-customer (KYC) and other due diligence checks, allowing the alleged fraud to continue for longer and increasing creditors’ losses.
The case arose from insolvency and civil proceedings brought before the Abu Dhabi Global Market Tribunal and the High Court of Justice of England and Wales in relation to NMC Health and its group companies. While the Abu Dhabi trials started on March 23, the trials in England were suspended until the outcome of the Abu Dhabi trial.
Under the settlement agreement, Bank of Baroda’s Abu Dhabi branch agreed to pay approx. ₹5,700 crore to joint directors of NMC Health PLC, NMC Healthcare Ltd and NMC Holding Ltd.
According to the application, the proceedings in the Abu Dhabi court were suspended following the agreement, while the proceedings in the United Kingdom are in the process of being withdrawn.
The agreement marks a change from the bank’s position in its FY26 annual report, when it had argued that allegations made by directors regarding the collapse of NMC Group could not be cleared due to its “strong defence, based on facts and law”.
In its evaluation of provisions and contingent liabilities in the annual report, the bank stated, “A high level of judgment is required in estimating the amount of the provision in cases where a liability seems probable. Accordingly, unexpected negative consequences may significantly affect the bank’s reported profit and situations presented in the balance sheet.”
Bank of Baroda shares traded down 3.3 percent ₹After the agreement was announced on Thursday, it decreased by 4.2% and became 251.50 per person as of 14:40 today.
Bank of Baroda has the second highest weightage in the Nifty PSU Bank index at around 13%. While the Nifty PSU Bank index gained 18.23% in value last year, Bank of Baroda shares increased by 3.78%.
operational performance
Separately, the bank on Thursday published its business update for the first quarter of FY27, reporting total business growth of 15.46% on a year-on-year basis. ₹30.51 trillion. Global advances increased by 17.42% ₹14.17 trillion and deposits increased by 13.81% ₹16.34 trillion. Domestic advances increased by 16.14% ₹11.51 trillion and domestic deposits increased by 13.81% ₹16.33 trillion.
The company’s EPS is expected to increase ₹43.2 in FY27 ₹38.7 in FY26 as per Motilal Oswal report dated July 3.
