Pessimism is overdone in financial space: Sanjiv Bhasin, IIFL Sec
If the DHFL deal goes through, that will be a shot in the arm for the market.
If the DHFL deal goes through, what would it mean for the NBFC sector as a whole?
It will be a shot in the arm and the RBI has been insisting that they will not directly lend to NBFCs but they have given banks a window of Rs 1 lakh crore, and leeway for 10% loss which they can stand by for the six months. I think this hesitation is overdone and mistrust has been created. They have viable assets. It is a question of just how fast they can dispose that. All the three things -- getting a new partner, converting debt into equity for reducing promoter stake and selling off the assets -- will take some time. It should be a very big positive going forward because we think the pessimism is overdone on financial lending space since rates are at a three-year low and yet the pass through is proving to be difficult.
If the deal of DHFL goes through, what will it mean for the NBFC sector as a whole?
It will be a shot in the arm and the RBI has been insisting that they will not directly lend to NBFCs but they have prompted banks to help better quality NBFCs. I think this hesitation is over done where mistrust was created. They have viable assets it is just how fast they can dispose that and I think all these three things you know getting a new partner, converting the debt into equity for reducing the promoter stake and in the meantime selling off the assets will be a matter of time. It should be a very big positive going forward because we think the pessimism is overdone in financial lending since rates are at a three-year low and yet the pass through is proving to be difficult.
When you just talk about such deals in the sector, will it also lead to a lot of confidence? If people want to sell their portfolio, would there be some buyers?
Correct. you have hit the nail on the head. The confidence is missing and there is no such thing as asset liability mismatch. You lend for five- year period and in the short term, the commercial paper and the market collapse. Now once these go through, there is no problem of good money buying good assets. Yesterday, that there was a Rs 8,500-crore ETF offer for CPSE and it got subscribed seven times or eight times and that tells you that good paper and good assets will always be bought. It is just the confidence that is missing which is why we are saying the markets have overreacted to the news flow being murky and some of the FII taxation part which is again a very good opportunity to buy because the cost of money is at a new low.
The government will be able to instigate a lot of confidence and as you rightly pointed out, just one or two of these deals going through will give a lot of confidence to the entire system, the mutual funds, the banks, the leveraged players and some of the victims who want to sell their assets but are not able to do so.