Latest news with #MFI
Economic Times
a day ago
- Business
- Economic Times
RBI's bold rate cut sets stage for market rally: Sandip Sabharwal
"I think most of the MFI-focused companies are trading at somewhat distressed valuations. And there were two comments, specifically, one that the RBI has clearly stated that they see easing stress on the unsecured loan book, so that is overall good for the financial sector, especially for NBFC and more specifically for MFIs," says Sandip Sabharwal, ADVERTISEMENT Where you see the markets headed today, the kind of fillip that we have seen on the Nifty on Friday, do you believe that is sustainable today and the sectors that have been leading over the course of last week, do you believe they will continue to lead this week as well? Sandip Sabharwal: Yes, I think so, because the RBI's actions were quite significant. And in fact, many other sectors like auto would also have participated much more, because they are very strong beneficiaries of the easing equity and rate cut cycle, but for the rare magnets issue. Otherwise, the autos would have done much better than what they did on Friday. And if that sector remains subdued due to concerns around these supplies and apparent shutdowns, etc, so at that time you could get opportunities to buy these stocks. Otherwise, what RBI has delivered combined with the kind of tax breaks which the government has given for the middle class this year, higher government spending, overall lower inflation, so it is a perfect combination for revival in economic growth and as that plays out, markets should also do well. The one point that I wanted to discuss is that this big bazooka that they have given, I mean, not just the policy rate cut, but even for the MFI sector, because this is one space within financials which did have quite a fair bit of stress. Tell me, how does this help the MFI sector? And would you be an investor here at all? Sandip Sabharwal: Yes, I think most of the MFI-focused companies are trading at somewhat distressed valuations. And there were two comments, specifically, one that the RBI has clearly stated that they see easing stress on the unsecured loan book, so that is overall good for the financial sector, especially for NBFC and more specifically for MFIs, although there would be some concerns related to some state government bringing out new laws, etc, where some specific company could get impacted, so that has to be more minutely analysed. But that comment combined with the fact that MFI lenders have the ability to diversify into other segments and still retain the MFI categorisation, I think that is a significant positive, because then risk can be maintained better in the balance sheet. So, overall, it is quite positive for the MFI sector, even for the gold lenders where the norms have been eased. So, something has been given to everyone. If you can just highlight some of your top favourites within the financial space. Well, of course, it is not just the MFIs, the gold financers, it is actually great news for many of these stocks, but which are your top bets within the financial space? Sandip Sabharwal: The larger bank can continue to do well, which include ICICI, HDFC, Axis, Kotak, etc. Some of the PSU banks could see a revival. So, because of the sheer underperformance, we have actually recently added into SBI also in our portfolios. ADVERTISEMENT The other part which could benefit, obviously the NBFCs benefit much more in a significant easing cycle than the banks, so NBFCs people have a wide choice like Manappuram, L&T Finance, Mahindra Financial, Bajaj Finance, etc, among the NBFCs. But then there are others also which could benefit. So, investors have a wide choice. But overall, for the NBFC sector, this what RBI has been doing over the last few months is a much more significant positive than banks per se because most large banks have 40-45% CASA deposits where the costing does not reduce so much immediately and it is more or less fixed, although most banks have cut rates by 25 basis points, but for NBFCs which tend to be bulk borrows, significant monetary easing is much more positive. ADVERTISEMENT The realty pack, where is it that you find comfort to buy a fresh or add-in or even some of the HFCs, for instance, maybe that is a better play. Sandip Sabharwal: I like diversified NBFCs better. So, I would focus on those because only focused housing finance companies will continue to face more and more margin pressures as the liquidity eases. So, it is better to be in the diversified space. On the real estate sector, obviously this benefits the real estate sector. But as of now, I am not finding comfort in buying into any of these real estate companies at these valuations because the run-ups in most in the near term has been very substantial be it the market leader something like DLF already valued from 600 odd to 850, 880 something, so the rallies over the last one or two months in most of the real estate counter has been so significant. It is tough to find value. But on correction, we could still evaluate. ADVERTISEMENT Where both the companies will actually see what they can do best. But it is a big issue that is now emerging for the auto companies specifically with the shortage of critical rare earth magnets rather coming in from China. What is your sense that how severe this could actually impact the Indian auto industry and other sectors as well, given the fact we have a lot of reliability on China when it comes to select magnets? Sandip Sabharwal: So, there is a lot of news to go on where the impacts could be. The direct impact is more on the auto side immediately but apparently be going to a electronics, etc. So, now it will depend on how fast. So, it is not a question of supply. The supply is there, the supply is not being given, so that is the issue. So, whether it will get resolved or not, we do not know. Overnight there has been some news flow that China has approved supplies to some European and US customers. So, the point is, is India going to be singled out or is this issue going to be resolved? So, there are too many moving pieces. So, we need to watch out for that. EVs apparently will be much more impacted. So, to that extent, companies which have bigger EV portfolio or greater reliance on EVs only or two-wheeler EV companies, etc, those might be impacted more if it does not get resolved over the next four to six months. ADVERTISEMENT
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Business Standard
4 days ago
- Business
- Business Standard
MFI stress to be steady in next few quarters: RBI Deputy Governor
Stress in the microfinance portfolio is expected to stabilise over the next couple of quarters, Swaminathan J, Deputy Governor, Reserve Bank of India (RBI), said on Friday during the post-monetary policy press meet. Meanwhile, RBI on Friday relaxed the qualifying criteria for Non-Banking Finance Companies (NBFCs) to be classified as Microfinance Institutions (MFIs). Under the revised criteria, NBFCs will have to maintain 60 per cent of their assets in the microfinance loan portfolio instead of the earlier 75 per cent. 'The entities predominantly in this segment have already identified, recalibrated their business models, and stepped up their collection methodologies. We have also seen a shrinkage of that portfolio due to this recalibration,' Swaminathan said, referring to MFIs. 'So, maybe over a period of time, over the next couple of quarters, this should stabilise,' he added, cautioning that much will depend on overall economic conditions and income levels, as MFI portfolios remain the most vulnerable segment. Data from CRIF High Mark shows that the delinquency rate (loans overdue by 90+ days) in the microfinance sector was 1.3 per cent in Q4 FY24, down from 1.8 per cent in Q3, but it remains a key concern for lenders. 'Q1 (FY26) is likely to see a peak in slippages. The various guardrails put in place by MFIN and Sa-Dhan are expected to benefit the sector in the long run. However, they will cause some short-term pain, which was necessary to clean the system. By Q2 or Q3, slippages should start to moderate. The only caveat is that MFI growth this year is expected to remain muted due to asset quality challenges coupled with slower growth,' said an official from a private bank. According to the CRIF High Mark report, the gross loan portfolio of NBFC-MFIs shrank by 18.2 per cent year-on-year to ₹1.8 trillion at the end of 31 March 2025. Experts said RBI's move to relax the qualifying criteria for NBFCs to be classified as MFIs will allow these companies to diversify into secured assets and continue growth, especially as self-regulatory organisations (SROs) tighten guardrails on the MFI portfolio. 'Reduction in the qualifying asset criteria for NBFC-MFIs shall improve their loan diversification, thereby augmenting their credit risk profile, and shall enable them to meet other credit requirements of their end borrowers,' said A M Karthik, Senior Vice President, ICRA. Ganesh Narayanan, CEO, CreditAccess Grameen, said, 'This policy shift will enable accelerated diversification within our operations, ensuring balance sheet stability and positioning us for robust cross-cycle earnings. The RBI has time and again introduced progressive measures that support the growth of the microfinance sector, creating a more inclusive ecosystem.'
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Business Standard
4 days ago
- Business
- Business Standard
MFI stress to remain steady in coming quarters: RBI's DG Swaminathan
Stress in the microfinance portfolio is expected to stabilise over the next couple of quarters, Swaminathan J, Deputy Governor, Reserve Bank of India (RBI), said on Friday during the post-monetary policy press meet. Meanwhile, RBI on Friday relaxed the qualifying criteria for Non-Banking Finance Companies (NBFCs) to be classified as Microfinance Institutions (MFIs). Under the revised criteria, NBFCs will have to maintain 60 per cent of their assets in the microfinance loan portfolio instead of the earlier 75 per cent. 'The entities predominantly in this segment have already identified, recalibrated their business models, and stepped up their collection methodologies. We have also seen a shrinkage of that portfolio due to this recalibration,' Swaminathan said, referring to MFIs. 'So, maybe over a period of time, over the next couple of quarters, this should stabilise,' he added, cautioning that much will depend on overall economic conditions and income levels, as MFI portfolios remain the most vulnerable segment. 'Q1 (FY26) is likely to see a peak in slippages. The various guardrails put in place by MFIN and Sa-Dhan are expected to benefit the sector in the long run. However, they will cause some short-term pain, which was necessary to clean the system. By Q2 or Q3, slippages should start to moderate. The only caveat is that MFI growth this year is expected to remain muted due to asset quality challenges coupled with slower growth,' said an official from a private bank. According to the CRIF High Mark report, the gross loan portfolio of NBFC-MFIs shrank by 18.2 per cent year-on-year to ₹1.8 trillion at the end of 31 March 2025. Experts said RBI's move to relax the qualifying criteria for NBFCs to be classified as MFIs will allow these companies to diversify into secured assets and continue growth, especially as self-regulatory organisations (SROs) tighten guardrails on the MFI portfolio. 'Reduction in the qualifying asset criteria for NBFC-MFIs shall improve their loan diversification, thereby augmenting their credit risk profile, and shall enable them to meet other credit requirements of their end borrowers,' said A M Karthik, Senior Vice President, ICRA. Ganesh Narayanan, CEO, CreditAccess Grameen, said, 'This policy shift will enable accelerated diversification within our operations, ensuring balance sheet stability and positioning us for robust cross-cycle earnings. The RBI has time and again introduced progressive measures that support the growth of the microfinance sector, creating a more inclusive ecosystem.'
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Business Standard
02-06-2025
- Business
- Business Standard
Spandana Sphoorty plans to scale back operations in Kerala and Gujarat
Stock down 4.4 per cent on BSE; eyes 20 per cent AUM growth in FY26 Listen to This Article Microfinance institution (MFI) Spandana Sphoorty Ltd, which suffered a loss of ₹1,035 crore in the financial year 2024-25 (FY25) after a profitable previous year, plans to scale back its operations in states like Kerala and Gujarat and grow cautiously in Maharashtra and Telangana to boost efficiencies. For FY26, the company said it was taking a step back to build a sustainable business and rationalise presence to have an impact on operational expenditure and efficiencies. Some other states where it would reduce presence are Rajasthan and Tamil Nadu. While it would grow cautiously in Chhattisgarh and Uttar Pradesh. After a sharp
Mint
27-05-2025
- Business
- Mint
Stocks to buy for long-term: ICICI Bank, HDFC Bank, SBI among Axis Securities' banking stock picks after Q4 results 2025
The Q4 results of the private banks as well as state-run lenders were mixed with net interest margins surprising positively for larger banks, but growth remaining elusive. Banks delivered a credit growth of 11% year-on-year (YoY). Slower credit growth versus Street expectations was primarily visible amongst the larger private banks, while most mid-sized banks delivered steady in-line growth. Credit growth was mainly driven by the Retail and SME segments, while corporate loans growth was visible mainly amongst PSU Banks. Private banks pointed to intense competitive pricing in the segment, thereby keeping growth muted, according to Axis Securities. Banks' deposit growth during the quarter was broadly in line with credit growth, with the brokerage firm's coverage banks delivering a deposit growth of 12% YoY in FY25. The seasonal strength in CASA Deposits was visible during the quarter, with most banks reporting improved CASA Ratios. NIMs for larger banks surprised positively and improved QoQ, while most mid-sized banks reported steady to marginally lower margins. However, for small finance banks (SFBs) and banks with higher MFI exposure, NIMs continued to contract meaningfully. The stress in the unsecured portfolios continued to keep slippages elevated, said Axis Securities. Axis Securities has recommended four banking stocks to buy after Q4 results 2025. These banking stock picks are ICICI Bank, HDFC Bank, State Bank of India (SBI) and City Union Bank. Here are banking stocks to buy after Q4 results 2025: ICICI Bank has continued to report consistent performance across metrics, demonstrating healthy credit growth, healthy margins, and robust asset quality, said the brokerage firm. ICICI Bank stock remains Axis Securities' most preferred pick amongst the banks. It has ICICI Bank share price target of ₹ 1,650 apiece, with a 'Buy' rating on the stock. Axis Securities believes HDFC Bank's margins will continue to operate in the range of 3.4% - 3.5% over FY26-27E. HDFC Bank is expected to deliver a steady 13% and 18% CAGR advances and deposits growth over FY25-27E, driving LDR improvement to ~88% by FY27E. RoA is expected to bounce back to historical levels ranging between 1.9% - 2.1%. Axis Securities has a 'Buy' call on HDFC Bank shares, with a target price of ₹ 2,250 per share. SBI's corporate loan growth in FY26 is expected to be healthy at 12-13%. According to Axis Securities, SBI remains well-poised to sustain its growth momentum, supported by its comfortable LDR, which provides it with levers to accelerate credit growth. It expects SBI's RoA and RoE to range between 1% and 14-15% over FY26-27E. It has a 'Buy' rating on SBI shares, with a target price of ₹ 1,025 apiece. The brokerage firm expects City Union Bank to deliver consistent RoA and RoE of 1.5% - 1.6% and 12% - 14% over FY26-27E, despite higher Opex ratios, and supported by strengthening fee income, steady NIMs and controlled credit costs. It recommends buying City Union Bank shares for a target price of ₹ 225 apiece. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
