Nothing very sure-footed on the NBFC front: Manish Sonthalia

In a chat with ET Now, Manish Sonthalia, Sr Vice President & Head–Equity Portfolio Management Services, Motilal Oswal Asset Management–PMS, shares his views on NBFCs, IDFC. Excerpts:

ET Now: What is your view on NBFCs right now and with the expectation on banking license especially a stock like IDFC?

Manish Sonthalia: Last quarter numbers seem to suggest that the NPA problems are now percolated down to the NBFCs as well. If you see the NPA situation in Mahindra & Mahindra Finance, they were alarming and one of the finest NBFCs having more of retail lending book as oppose to the corporate book and NPA shot through the roof. So one needs to be very selective.

The run-up in IDFC is more on account of expectations of winning banking license but again that would be winners as we all know that the first five years new bank license would not make any money, in fact he would incur losses. So entire business model needs to be changed with revival in economic cycle, better NPA situations. Maybe situation would improve.

Whether it is too early to price that into stock price could be, but nothing very sure-footed on the NBFC front. The situation is bad. NPA problems are now getting down to the NBFC space as well, I mean we have Bajaj Finance so they have a very niche market segment and the credit appraisal is sound or something like a Sundram Finance, very niche player. One needs to look at the balance sheet situation of NBFCs which on a very general basis could not be said that they are now still away from the NPA problems. NPA problems are coming to NBFCs as well.