Value investor- India mid & small caps

Bhaskar Chakraborty

Thematic (Sector/Industry)

India Financials / Thematic (Sector/Industry)

<ul>
<li>India’s financial markets are witnessing the highest number of liquidity issues since the global financial crisis. These include IL&amp;FS, <a href="https://www.smartkarma.com/entities/8142" target="_blank" data-smartkarma-citation="entities:8142:1">Dewan Housing Finance (DEWH IN)</a> , promoter group of <a href="https://www.smartkarma.com/entities/19466" target="_blank" data-smartkarma-citation="entities:19466:1">Zee Entertainment Enterprises (Z IN)</a> and the Anil Ambani group.</li>
<li>Direct lending by banks to mortgage financiers perceived as fraud risk has stopped almost completely. These include DHFL and <a href="https://www.smartkarma.com/entities/13086" target="_blank" data-smartkarma-citation="entities:13086:1">Indiabulls Housing Finance (IHFL IN)</a> .</li>
<li>Multi-line NBFCs and real estate financiers have seen sharp jump in borrowing costs and curtailment of bank loan availability. Loan book growth has slowed sharply and excess liquidity on balance sheet is hurting NIMs.</li>
<li>MFs have in recent times subscribed to NBFC bond offerings in a structure where there is an upfront fee received from the NBFC on subscribing to the bond in addition to the periodic coupon. This has allowed the MF industry to carry papers from such NBFCs at a higher price than what the marginal cost of funding (including fees) indicates. <a href="https://www.smartkarma.com/entities/253" target="_blank" data-smartkarma-citation="entities:253:1">Shriram Transport Finance (SHTF IN)</a> (subordinated bonds), <a href="https://www.smartkarma.com/entities/14158" target="_blank" data-smartkarma-citation="entities:14158:1">Piramal Enterprises (PIEL IN)</a> , <a href="https://www.smartkarma.com/entities/27025" target="_blank" data-smartkarma-citation="entities:27025:1">IndoStar Capital Finance Ltd (INDOSTAR IN)</a> and <a href="https://www.smartkarma.com/entities/15015" target="_blank" data-smartkarma-citation="entities:15015:1">Edelweiss Capital (EDEL IN)</a>  are among the NBFCs who have issued bonds under this structure.</li>
<li>
<a href="https://www.smartkarma.com/entities/1693" target="_blank" data-smartkarma-citation="entities:1693:1">Sobha Ltd (SOBHA IN)</a>  (A+ rated among the highest in real estate space) recently said it is struggling to get liquidity from NBFCs. With bank lending to the sector tepid, this is the worst funding crunch the sector has faced since the global credit crisis. The probability of liquidity events in the sector remain elevated in our view.</li>
</ul>


India’s financial markets are witnessing the highest number of liquidity issues since the global financial crisis. These include IL&amp;FS, Dewan Housing Finance (DEWH IN) , promoter group of Zee Entertainment Enterprises (Z IN) and the Anil Ambani group.
Direct lending by banks to mortgage financiers perceived as fraud risk has stopped almost completely. These include DHFL and Indiabulls Housing Finance (IHFL IN) .
Multi-line NBFCs and real estate financiers have seen sharp jump in borrowing costs and curtailment of bank loan availability. Loan book growth has slowed sharply and excess liquidity on balance sheet is hurting NIMs.
MFs have in recent times subscribed to NBFC bond offerings in a structure where there is an upfront fee received from the NBFC on subscribing to the bond in addition to the periodic coupon. This has allowed the MF industry to carry papers from such NBFCs at a higher price than what the marginal cost of funding (including fees) indicates. Shriram Transport Finance (SHTF IN) (subordinated bonds), Piramal Enterprises (PIEL IN) , IndoStar Capital Finance Ltd (INDOSTAR IN) and Edelweiss Capital (EDEL IN)  are among the NBFCs who have issued bonds under this structure.

Sobha Ltd (SOBHA IN)  (A+ rated among the highest in real estate space) recently said it is struggling to get liquidity from NBFCs. With bank lending to the sector tepid, this is the worst funding crunch the sector has faced since the global credit crisis. The probability of liquidity events in the sector remain elevated in our view.


IndoStar Capital Finance Ltd (INDOSTAR IN)

India Liquidity Update: Widening Crisis of Confidence, NBFCs and Developers Struggle for Liquidity