Not excited about NBFC space: Gaurav Mehta, Ambit Capital

In a chat with ET Now, Gaurav Mehta, VP, Institutional Equities, Ambit Capital, shares his views on the NBFC space. Excerpts:

ET Now: A lot of transactions have been happening in the NBFC space. ARC transactions by nonbanking institutions are also taking place, what is the view on the broad NBFC space excluding banks and housing finance?

Gaurav Mehta: Broadly speaking, on the NBFC space our view has been that the regulatory arbitrage has been closed by the RBI versus a lot of other banks especially in categories where there is not much of a differentiation between the NBFC offerings versus the bank offerings. Their pressure on balance sheet and non-profitability will continue.

From that point of view as a blanket trade, NBFCs is not a space that we are very excited about. There are NBFCs which have the opportunity to transform themselves into something else and there might be some scope for further growth but overall as a blanket space, NBFCs is an area where this closing regulatory arbitrage will continue to mean more pressure on profitability and balance sheet going ahead, especially in categories where there is not much of a differentiation.