Equity Research INDIAvid.investmentguruindia.com/report/2020/June/NBFC_sector... · 2020. 6. 6. ·...

Please refer to important disclosures at the end of this report

Equity Research June 5, 2020

BSE Sensex: 33981

ICICI Securities Limited is the author and distributor of this report

BFSI

Thematic

NBFC

Trifecta of tight liquidity, de-risking and de-leveraging will force business model reset

In this report, we have comprehensively analysed borrowing dynamics of shadow banks (liability profile, CP/bond issuances, maturity calendar, roll-overs, corporate spreads) to gauge how liquidity constraints and risk aversion can lead to a structural business model reset for many. Some prominent and some evolving indicators suggest shadow banks will be forced to reorient and rebalance their business models in the near to medium term via de-risking of balance sheet, co-origination, syndicate/sell-down, merger, etc. Consolidation towards stronger players imminent - HDFC, Aavas, AU SFB, Cholamandalam – our top picks in the space. Prominent names derisking due to liability constraints and leverage are IHFL and PNB Housing; due to risk aversion are Piramal, L&T Finance, etc. Also, Repco, Magma, and Shriram City Union Finance could be potential acquisition targets (niche business available at beaten-down valuations).

NBFCs/HFCs’ borrowing dynamics undergoing acute transition: A trifecta of tight liquidity, steady decline in debt AUMs and risk aversion led to: 1) sharp fall in share of market borrowing from ~60% in FY17 to 40-42% in Apr’20 (chart 1); 2) CPs, once the darling, are now being viewed as a scourge (chart 9,10) – MFs’ investment in their CPs is down >75% (from its peak of Rs2.7trn in July 2018 to <Rs700bn now). However, banks in the driver's seat managed to salvage the situation – ramping up their lending to NBFCs more than 2x to Rs8.1trn in Apr’20 (~30% CAGR since FY17); bank borrowing by NBFCs has risen by 10% to >30% by FY20.

Is re-leveraging off for a while? Rollover rates down to 60-80% (chart 13,14,15) and extreme risk aversion from debt market participants constrained shadow banks’ borrowing capacity forcing them to de-leverage. Bank lending to NBFCs hitting 9% of bank credit will incrementally face sectoral cap restrictions. Covid-19 uncertainty and volatility has further hampered and derailed risk appetite. Therefore, despite extremely comfortable systemic liquidity and RBI initiatives to channelise funding into NBFCs/HFCs/MFIs, risk aversion towards shadow banks is not going to reduce in a hurry. It will take a while before animal spirits return and they start re-leveraging.

Business model reorientation imminent: Prolonged disruption – started with the liquidity crisis, transcended into confidence crisis and now the Covid-19 crisis – has led NBFCs to sacrifice growth, prune balance sheets and become asset light. This is especially for players landing from high growth phase into liquidity/Covid-19 crisis, namely Piramal, L&T Finance, PNB Housing, etc. Given that it will not be business as usual in the near to medium term, many niche players like Shriram City, Magma, etc. will reorient towards co-lending and being a sourcing agents for banks. Also, sell-downs and retail issuances will take precedence on the liability side of the book.

Adversity conducive for strategic acquisitions: Lack of confidence further aggravated by market cap erosion has made the space conducive for strategic acquisitions and consolidation. The current adversity gives banks, corporate groups and leading NBFCs an opportunity to acquire an NBFC’s niche business at alluring valuations. Many are available at sub-par book and at values less than 10% of AUM despite superior return profile (table 14).

Consolidation and capital raising in the offing: Anomaly of spike in borrowing costs for many with not easy access to liquidity while corporate-backed and top-rated players being able to raise money at competitive rates, will lead to consolidation of market share towards stronger players (HDFC, Aavas in housing finance; AU SFB, Cholamandalam in auto financing, etc) – our top picks in the space. Despite beaten down valuations, there will be wave of capital raising – we estimate USD3.5-4.5bn of equity raising from shadow banks - call it risk or preservation or confidence or growth/opportunity capital.

INDIA

Research Analysts:

Kunal Shah [email protected] +91 22 6637 7572

Abhijit Tibrewal, CFA [email protected] +91 22 6637 7230

Renish Bhuva [email protected] +91 22 6637 7465

Sandeep Joshi [email protected] +91 22 6637 7658

NBFCs June 5, 2020 ICICI Securities

2

NBFCs/HFCs borrowing dynamics undergoing acute transition

We have comprehensively analyzed borrowing dynamics of non-bank lenders to

gauge how liquidity constraints can usher in a few structural business model changes.

Amidst the liquidity crisis, net borrowings for non-bank lenders have remained broadly

stable from Mar’18 to Sep’19 (as per RBI). As a matter of fact, looking at individual

NBFCs/HFCs’ performance, consolidation trend continued even post Sep’19 till Mar’20

and non-bank lenders as a sub-segment have further lost market share. Amidst the

Covid-19 pandemic, we do not expect the conditions to be conducive, hence rundown

in advances will only get accentuated.

A hard look at trends over the past two years suggests NBFCs’ borrowing dynamics

and mix have undergone acute transition:

Chart 1: Fall in market borrowings, banks salvage the situation

50.2 50.1 49.1 49.0 47.4 45.3 42.4 42.1 41.5 41.1 40.80

21.2 20.1 20.4 22.3 23.6 24.0 27.7 28.1 29.2 29.4 30.8

9.0 9.4 10.5 8.4 8.5 9.8 9.5 8.1 7.6 6.1 4.2

19.6 20.4 20.0 20.3 20.5 21.0 20.4 21.7 21.7 23.5 24.2

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Mar-

17

Jun-1

7

Sep-1

7

Dec-

17

Mar-

18

Jun-1

8

Sep-1

8

Dec-

18

Mar-

19

Sep-1

9

Mar-

20

(%)

Debentures Bank CPs Others

Source: RBI, I-Sec Research

A trifecta of tight liquidity, steady decline in debt AUMs (since Aug’18) and

significant risk aversion (especially towards NBFCs/HFCs) led to sharp fall in the

share of market borrowings (CPs + bonds/debentures) from ~60% in FY17 to

~47% in Sep’19. Further, issuances/MFs’ holding data suggest it would have only

contracted further to around 40-42% in Apr’20.

CPs, once the darling, are now being viewed as a scourge. Investment into CPs of

NBFCs/HFCs is down >75% from its peak (from Rs2.7trn in July 2018 to less than

Rs700bn now) and the proportion of CPs in overall borrowing is down from 10-

12% (in Sep’2017) to less than 5%. However, this ill-treatment of CPs is restricted

to NBFCs/HFCs and commercial papers of corporates have not reflected such

disinterest.

Banks in the driver’s seat managed to salvage the situation by ramping up their

lending to NBFCs more than twofold (almost 30% CAGR) from Rs3.9trn in Mar’17

to Rs8.1trn in Apr’20) – the proportion being up from 20% in FY17 to >30% by

FY20.


3

Also, sell-downs (assignments/securitisation) as a source of borrowing was closely

relied upon, especially post the IL&FS crisis.

A huge divergence in borrowing instruments (long-term papers preferred over CPs) is

evident. Preference for longer-tenure debentures/bonds is increasing with cumulative

bond issuances over the past five months being higher than those issued prior to

Sep’18. Post the IL&FS crisis, CPs, once a reliable instrument to fund incremental

growth, have now become a scourge. System-wide outstanding CPs (short-term

borrowings) are down 25% in past one year to Rs4.3trn (down >30% since its peak in

Sep’18 at Rs6.4trn).

Chart 2: CPs down >30% from its peak Chart 3: Long term bonds preferred over CPs

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jun

-11

Dec-1

1

Jun

-12

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-13

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3

Jun

-14

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9

(Rs tn)

Outstanding CPs

-

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'Jun-1

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8

Jun

-19

Dec-1

9

(Rs tr)

Outstanding bonds


Source: SEBI, I-Sec Research

Chart 4: CPs - once the darling, now being viewed as a scourge

Chart 5: Incremental funding met via bonds

6100

7854

6067 6259 61315660 5347

4521

2403

500

2000

3500

5000

6500

8000

9500

Q1F

Y19

Q2F

Y19

Q3F

Y19

Q4F

Y19

Q1F

Y20

Q2F

Y20

Q3F

Y20

Q4F

Y20

Q1F

Y21 (

QT

D)

Issuance of CPs

1225 1328

17462009

1411

17201885

2359

1398

0

500

1000

1500

2000

2500

Q1F

Y19

Q2F

Y19

Q3F

Y19

Q4F

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Q1F

Y20

Q2F

Y20

Q3F

Y20

Q4F

Y20

Q1F

Y21 (

QT

D)

Issuance of NCD/Bonds

Source: Industry databases, I-Sec Research

Source:Industry databases, I-Sec Research


4

Chart 6: NBFCs/HFCs proportion in overall issuances down to 15-20%

8 12 114 5 9

1613 13

14 711

12 6 6 11

3

3

10 2114 18

1613

5447

57 54

69 64

0%

20%

40%

60%

80%

100%

Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20

Proportion in total (NCD + CP) issuances

HFCs NBFCs Other FIs Public FIs Corporate

Source:Industry databases, I-Sec Research

Interestingly, the proportion of bank investments in these CPs has risen sharply from

15% to 28% while mutual funds have turned extremely risk-averse to these

instruments. The proportion of MF investment in CPs is down from 75-80% to 65% in

last one year (in absolute terms, down >30% in past one year and >40% from its peak

in Aug’18). More importantly, MFs have specifically shied away from NBFCs/HFCs as

a sub-segment; their investments are down to Rs640bn (>60% in past one year from

Rs1.7trn and >75% from its peak at Rs2.7trn).

Chart 7: Banks in driver’s seat during tight liquidity; lending to NBFCs up >2x

Chart 8: Bank’s participation in CP market has also risen in past one year

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Ap

r-08

Oct

-08

Ap

r-09

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r-11

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r-17

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-17

Ap

r-18

Oct

-18

Ap

r-19

Oct

-19

Ap

r-20

(%)(R

s bn)

Bank credit to NBFCs

Bank lending to NBFC/Bank credit (%)

10.0

16.0

22.0

28.0

34.0

40.0

2,000

3,000

4,000

5,000

6,000

7,000

Ap

r-17

Jul-1

7

Oct

-17

Jan

-18

Ap

r-18

Jul-1

8

Oct

-18

Jan

-19

Ap

r-19

Jul-1

9

Oct

-19

Jan

-20

Ap

r-20

(%)(R

s bn)

Outstanding CPs Prop of bank's invt in CPs




5

Chart 9: MFs extremely risk averse to NBFCs/HFCs

Chart 10: …as well to CPs as an instrument

1.4 1.4 1.3 1.2 1.4 1.0

0.6 0.4 0.5

0.8 1.0 0.5 0.5

0.5

0.5

0.4 0.2 0.3

1.8 1.7

2.0 1.8

2.4

1.9

1.9

1.6 2.1

-

1.0

2.0

3.0

4.0

5.0

Jun

-18

Se

p-1

8

Dec-1

8

Ma

r-19

May-1

9

Se

p-1

9

Dec-1

9

Ma

r-20

Ap

r-20

(Rs tn)

NBFC CPs HFC CPs Other CPs

33.6 29.3

24.1

11.6 10.0

3.9 7.1

4.3 2.2 -

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Jun

-18

Au

g-1

8

Oct-

18

Dec-1

8

Fe

b-1

9

Ap

r-19

Jun

-19

Au

g-1

9

Oct-

19

Dec-1

9

Fe

b-2

0

Ap

r-20

(%)

Proportion of overall debt AUMs

Overall CPs NBFC CPs HFC CPs


Chart 11: Similar risk aversion not witnessed for bonds


Chart 12: …and investment in bonds up 13-15% points in general and flat for NBFCs/HFCs

1.9 1.8 1.8 1.9 2.0 1.8 1.9 1.9 1.9

0.9 0.8 0.8 0.9 1.0 1.0 1.0 1.0 0.9

2.8 2.7 2.9 2.9 2.9 3.8

4.1 4.1 4.0

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Jun

-18

Se

p-1

8

Dec-1

8

Mar-

19

May-1

9

Oct-

19

Dec-1

9

Mar-

20

Ap

r-20

(Rs tn)

NBFC bonds HFC bonds Other bonds

46.4 47.7

58.4

15.8 15.9 16.1

7.2 7.5 8.6 -

10.0

20.0

30.0

40.0

50.0

60.0

70.0Jun

-18

Au

g-1

8

Oct-

18

Dec-1

8

Fe

b-1

9

Ap

r-19

Jun

-19

Au

g-1

9

Oct-

19

Dec-1

9

Fe

b-2

0

Ap

r-20

(%)

Proportion of overall debt AUMs

Overall bonds NBFC bonds HFC bonds




6

Table 1: Liability profile of HFCs (December 2019)

Dec-19 HDFC LICHF PNBHF IBHL Repco Home Can Fin Homes Aavas

Total borrowings (Rs mn) 39,51,280 18,49,660 7,05,590 10,40,890 97,878 NA 60,776

Borrowings mix (%) Term Loans 19% 19% 23% 34% 84% 57% 44%

Debentures and Securities 45% 68% 22% 38% 7% 26% 15% Deposits 32% 6% 19% - - - -- ECB 4% - 6% 4% - - -- CP - 5% 3% - 0% - - Direct Assignment - - 20% 23% - - 28% NHB Term Loans - 1% 7% - 9% 15% 13% Others - 1% - - -- 2% - Total 100% 100% 100% 100% 100% 100% 100%

Source: Company data, I-Sec Research

Table 2: Liability profile of NBFCs (December 2019)

Dec-19 Bajaj Finance MMFS Chola Shriram

Transport Shriram City Piramal

Total borrowings (Rs mn) 12,20,500 5,89,500 5,49,410 9,15,160 2,20,300 5,04,100

Borrowings mix (%) Term Loans 38% 25% 60% 16% 49% 65%

Banks CC and WCDL Debentures and Securities 42% 37% 12% 24% 16% 18%

Deposits 17% 14%

13% 19% ECB 3% 4% 5% 13%

2%

CP - 5% 7% 1% 2% 4% Securitization/Direct Assignment - 15% 9% 24% 14% 8% NHB Term Loans - - -- - - - Others - - 7% 8% - 3% Total 100% 100% 100% 100% 100% 100%

Dec-19 Magma Manappuram Muthoot Sundaram

Finance LTFS

Total borrowings (Rs mn) 1,26,860 1,64,823 3,25,942 2,92,060 9,29,970

Borrowings mix (%) Term Loans 59% 17% 40% 16% 43%

Banks CC and WCDL 27% 46% - - - Debentures and Securities 6% 11% 33% 44% 43% Deposits - - -- 13% - ECB - 2% 10% - 3% CP - 24% 14% 11% 9% Securitization/Direct Assignment - - - 17% - NHB Term Loans - - - - - Others 8% 1% 3% - 2% Total 100% 100% 100% 100% 100%



7

Is re-leveraging off for a while?

The deleveraging of short-term instruments is clearly reflected in CP rollover rates for

shadow banks – down to 60-80% on an average.

Chart 13: Only handful of shadow banks have fully rolled over CPs

159%

112%

100%

98%

89%

88%

87%

85%

83%

80%

77%

75%

73%

70%

64%

64%

59%

48%

39%

35%

0%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

PF

C

ST

FC

IIFL F

inance

TM

F

Piram

al

LTF

H

HD

FC

BA

F

LIC

HF

RE

C

GIC

Housi

ng

Manappur

am

Muth

oot

CanFin

Sundara

m

Hero

Fin

corp

AB

Capita

l

Chola

PN

BH

F

MM

FS

SC

UF

CP Rollovers (Dec-19 to May-20)


Chart 14: Average roll-over rate was 60-80% for NBFCs/HFCs

Chart 15: Better rated and corporate backed players take a lead in rollovers

121%

102%

100%

100%

89%

81%

75%

74%

69%

69%

67%

56%

50%

45%

42%

33%

25%

0%

0%

0%

20%

40%

60%

80%

100%

120%

140%

TM

F

Piram

al

GIC

Housi

ng

IIFL F

inance

LTF

H

Hero

Fin

corp

LIC

HF

AB

Capita

l

Sundara

m

HD

FC

Muth

oot

Manappur

am

BA

F

Chola

PN

BH

F

CanFin

MM

FS

Repco

SC

UF

CP Rollovers (Dec-19 to Feb-20)

225%

159%

133%

125%

116%

106%

100%

96%

88%

84%

80%

77%

62%

59%

52%

44%

38%

33%

12%

0%

0%

0%

50%

100%

150%

200%

250%

RE

C

PF

C

HD

FC

CanFin

BA

F

Manappur

am

IIFL F

inance

LIC

HF

MM

FS

LTF

H

Muth

oot

TM

F

Piram

al

Sundara

m

Chola

GIC

Housi

ng

AB

Capita

l

Hero

Fin

corp

ST

FC

PN

BH

F

SC

UF

CP Rollovers (Mar-20 to May-20)

Source: Industry databases, I-Sec Research Source: Industry databases, I-Sec Research


8

Also, bank lending to NBFCs hitting 9% of total bank credit (which will incrementally

face sectoral cap restrictions) and extreme risk aversion from debt market participants

will constrain borrowing capacity for shadow banks. Covid-19 uncertainty and volatility

has further hampered and derailed risk appetite.

Chart 16: With bank’s lending to NBFCs hitting 9%, will bank support continue?

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Oct-

19

Ap

r-20

(%)(R

s b

n)

Bank credit to NBFCs Bank lending to NBFC/Bank credit (%)


RBI has taken a number of measures to augment system-level liquidity and channelise

liquidity to specific sectors (particularly NBFCs, HFCs, MFIs as also MSMEs) facing

liquidity constraints.

Interestingly, RBI has widened the gap between reverse repo rate (RRR) and

policy repo rate to 65bps. Despite this, systemic liquidity remained very

comfortable with average daily net absorption under LAF being at Rs5.7tn.

Long-term repo operations (LTROs) executed to provide adequate liquidity at the

longer end of the yield curve, exemptions from CRR for the equivalent of

incremental credit disbursed by banks in certain segments and Targeted LTROs

were well-intentioned measures. RBI has injected Rs1.2trn through OMOs.

Rs880bn was infused through three tranches under TLTRO 1.0 and one tranche

under TLTRO 2.0. However, TLTROs were mostly deployed in primary issuances

by public-sector entities and large corporates. To counter this, RBI introduced

TLTRO 2.0 directed at small and mid-sized NBFCs/MFIs. However, given the

continued risk aversion of banks, the first tranche of TLTRO 2.0 failed to garner

much interest from them (‘bid to cover’ ratio was ~51%).

RBI has also provided special refinancing facilities of Rs500bn to All-India

Financial Institutions (AIFIs) like NABARD, SIDBI and NHB.

As part of Atma-nirbhar (self-sustaining) India package, GoI announced Rs300bn

of special liquidity scheme (fully guaranteed by the GoI) for investment in

investment-grade debt papers of NBFCs/HFCs/MFIs. It also extended the Partial

Credit Guarantee Scheme (PCGS 1.0) to cover primary issuances of bonds/CPs.

PCGS 2.0 would provide for first 20% of the loss and is expected to infuse

~Rs450bn of liquidity for NBFCs/HFCs/MFIs.


9

The above steps have slightly brought down (MoM) the risk aversion towards shadow

banks as liquidity problem for some NBFCs would not translate into a solvency

concern for the next 3-4 months. Debt papers of NBFCs/HFCs, which were witnessing

a sharp spike in yields in the secondary market, have showed some semblance of

normalisation in the last month - visible in the MoM change in spreads (over G-Secs).

However, the spreads for shadow banks yet remain elevated (YoY) indicating that the

risk aversion towards NBFCs is not going to reduce in a hurry. It will take a while

before animal spirits return and they start re-leveraging.

Chart 17: NBFCs/HFCs yields reflects continued risk aversion…

Chart 18: … so do the spreads over G-Sec

6.7

6.8 6.9

6.9

7.0 7.5 7.8 7.9 8.1

8.2 8.7 9.0 9.6 10.0

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Baja

j Fin

ance

Sundara

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mandal

am

Mahin

dra

…

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H

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inance

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oot

PN

B H

ous

ing

Aava

s

Shrira

m…

Manappur

am

(%)

Traded Yields (3Y)

212

217

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254 304

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330

367 418

452

488

513 587 632

0

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PF

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mandal

am

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B H

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m…

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(bps)

Spreads to G-Secs (3Y)


Chart 19: Though spreads to G-Sec contracted in the past one month…

Chart 20: … it still remains elevated from a one year perspective

-220

-116

-52-35 -27 -25 -13 -12 -10

25 28 35

-250

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-100

-50

0

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Mahin

dra

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ance

Shrira

m T

ranspor

t

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Baja

j Fin

ance

PN

B H

ous

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AB

Capita

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Sundara

m F

inance

Muth

oot

(bps)

Change in spreads from last month (3Y)

78 91 102 112131 144

163190 195

226 236

371

0

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PF

C

RE

C

HD

FC

Baja

j Fin

ance

LIC

HF

Sundara

m…

AB

Capita

l

PN

B H

ous

ing

Mahin

dra

…

LTF

H

Muth

oot

Shrira

m…

(bps)

Change in spreads from last year (3Y)



10

Chart 21: Yields on NBFC papers continue to remain elevated

Chart 22: Risk aversion to shadow-banks evident even in AAA NBFC spreads

4

5

6

7

8

9

10

Jan

-18

Mar-

18

May-1

8

Jul-1

8

Se

p-1

8

Nov-1

8

Jan

-19

Mar-

19

May-1

9

Jul-1

9

Se

p-1

9

Nov-1

9

Jan

-20

Mar-

20

May-2

0

(%)

G-Sec (5Y) AAA corp (5Y) AAA NBFC (5Y)

0.0

0.5

1.0

1.5

2.0

2.5

Jan

-18

Mar-

18

May-1

8

Jul-1

8

Se

p-1

8

Nov-1

8

Jan

-19

Mar-

19

May-1

9

Jul-1

9

Se

p-1

9

Nov-1

9

Jan

-20

Mar-

20

May-2

0

(%)

AAA Corp spreads (5Y) AAA NBFC spreads (5Y)

Source: Bloomberg, I-Sec Research Source: Bloomberg, I-Sec Research

Chart 23: Yields on AAA-rated and AA-rated NBFC papers

Chart 24: Spreads of AA NBFC papers over AAA NBFC papers have widened

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Jul-1

2

Dec-1

2

Ma

y-1

3

Oct-

13

Ma

r-14

Au

g-1

4

Jan

-15

Jun

-15

Nov-1

5

Ap

r-16

Se

p-1

6

Fe

b-1

7

Jul-1

7

Dec-1

7

Ma

y-1

8

Oct-

18

Ma

r-19

Au

g-1

9

Jan

-20

(%)

AAA NBFC (5Y) AA NBFC (5Y)

40

50

60

70

80

90

100Jan

-18

Ma

r-18

May-1

8

Jul-1

8

Se

p-1

8

Nov-1

8

Jan

-19

Ma

r-19

May-1

9

Jul-1

9

Se

p-1

9

Nov-1

9

Jan

-20

Ma

r-20

May-2

0

(bps)

Spread of AA NBFC over AAA NBFC

Source: Bloomberg, I-Sec Research Source: Bloomberg, I-Sec Research


11

Re-orienting and de-risking business model imminent

Shadow banks over years have demonstrated their niche and dominance in several

product and business segments and have been ahead of the curve in last mile

connectivity and customer-centricity. However, they have witnessed a prolonged

season of disruption – which started with the liquidity crisis, transcended into

confidence crisis and now accentuated by the Covid-19 crisis. Given that it will not be

business as usual in the near to medium term, several players will be forced to

reinvent their business model and derisk their balance sheets.

Co-origination, sell-down, retail issuance to take prominence

Sacrificing growth, pruning balance sheets and being asset light will be key to

navigating the current crises, amidst constraints on supply side. This will be true

especially for players landing from high-growth phase into liquidity/Covid-19 crisis,

namely Piramal, L&T Finance, PNB Housing, etc.

Chart 25: Players landing from high-growth phase into crisis to consolidate

43

35

31

31

27

23

21

19

18

17

17

16

15

15

14

14

14

13

13

12

10

9

4

0

0.05.0

10.015.020.025.030.035.040.045.0

Aa

vas F

ina

ncie

rs

Ba

jaj F

inan

ce

Hero

Fin

corp

PN

B H

ousin

g

Pira

mal…

Ma

nappura

m

Chola

mandala

m

India

Info

Lin

e…

Mu

thoot

Fin

ance

AB

Capital

RE

C

CanF

in H

om

es

HD

FC

Ma

hin

dra

…

LT

FH

GIC

Housin

g

LIC

Ho

usin

g

Su

ndara

m…

Sh

rira

m…

PF

C

Repco H

om

e

Sh

rira

m C

ity…

India

Bulls

…

Ma

gm

a

(%)

3-yr AUM CAGR (%)


In these circumstances, scope for many non-bank lenders would be restricted to co-

lending and being sourcing agents for banks. NBFCs’ uniqueness in terms of

customer relationship, local knowledge, reach and distribution capabilities can be

leveraged by banks to co-originate loans. Though margin-dilutive, it can provide a

sustainable model through fee income.


12

Also, on liability side, sell-down and retail issuances will take precedence.

Chart 26: Sell-downs (despite March disruption) remained major funding source

359

682

238

277

238

181

934

365

907

185

169

150

174

678

97

270

66

68

68

69

271

17

9 13

8 5 0 26

0

120

0 3 6 0 9

0

200

400

600

800

1000

FY18 FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 FY20

(Rs b

n)

Sell-downs

NBFC HFC NBFC-MFI SFB Others

838

19881918

Source: ICRA Research, I-Sec Research

Consolidation in the offing

Borrowing costs for many players have spiked coupled with not easy access to

liquidity. At the same time, corporate-backed and top-rated players are able to raise

money at competitive rates. This anomaly will lead to consolidation of market share in

the space towards stronger players (HDFC, Aavas in housing finance; AU SFB,

Cholamandalam in auto financing, etc).

Chart 27: Spreads to G-Secs continues to remain elevated

212

217

222

252

254 304

306

330

367 418

452

488

513 587 632

0

100

200

300

400

500

600

700

PF

C

RE

C

HD

FC

Baja

j Fin

ance

LIC

HF

Hero

Fin

corp

Sundara

mF

inance

AB

Capita

l

Mahin

dra

Fin

ance

LTF

H

IIFL F

inance

Chola

mandal

am

PN

B H

ous

ing

Shrira

mT

ransp

ort

Muth

oot

(bps)

Spreads to G-Secs (3Y)



13

Adversity conducive for strategic acquisitions

Lack of confidence further exemplified by market cap erosion have made the space

conducive for strategic acquisition and consolidation. The recent instances of NBFC

merger into banks can further intensify – Gruh/Bandhan Bank, Bhafin/Indusind, Capital

First/IDFC Bank. The current adversity gives banks, corporate groups and leading

NBFCs an opportunity to acquire NBFCs’ niche business at alluring valuations. Many

are available at sub-par book and at values less than 10% of AUM despite superior

return profile.

Chart 28: Alluring valuation conducive for buyouts of niche franchise

1.1

0.9

0.8

0.6

0.5

0.5

0.4

0.2

0.2

0.2

0.1

0.1

0.1

0.1

0.1

0.1

0.1

0.1

0.1

0.1

0.0

0.0

0.0

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Aava

s F

inancie

rs

Baja

j Fin

ance

Muth

oot Fin

ance

HD

FC

Piram

al E

nte

rpris

es…

Manappur

am

Sundara

m F

inance

AB

Capita

l

CanFin

Hom

es

Chola

mandal

am

Shrira

m C

ity U

nio

n

Mahin

dra

Fin

ance

Shrira

m T

ranspor

t

LTF

H

India

Info

Lin

e F

inance

PF

C

LIC

Housi

ng

RE

C

Repco

Hom

e

India

Bulls

Housi

ng

PN

B H

ous

ing

GIC

Housi

ng

Magm

a

(x)

Mcap/AUM


USD3.5-4.5bn equity raising – call it a risk, preservation, confidence,

or growth capital

Barring a few outliers, most (even the better-rated) NBFCs/HFCs today are trading at,

or less than, their current book value. Even though raising fresh equity capital at such

beaten-down valuations will be dilutive for the existing shareholders, most

NBFCs/HFCs would evaluate an equity capital raise over the next 6-9 months. Given

that the FY21 growth outlook remains muted, most NBFCs/HFCs today would seem

comfortably placed when we look at their tier-1 capital.

Chart 29: HFCs leverage hovering high Chart 30: De-leveraging & de-risking has helped manage leverage; expected to continue

11.9 10.7 10.2 10.2

7.1 6.1 6.1

3.7 3.7

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

LIC

Ho

usi

ng

GIC

Housi

ng

PN

B H

ousi

ng

CanF

in H

om

es

Repco

Hom

e

India

Bulls

Housi

ng

HD

FC

Pira

mal E

nte

rprise

s(F

inanci

al S

erv

ices)

Aa

vas

Fin

anci

ers

Leverage (x)

8.5 7.8 7.5 7.3 7.2

6.5 6.2 6.0 5.9 5.7 5.2 5.1 5.0

4.3 4.2

- 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

RE

C

Chola

mandal

am

PF

C

LTF

H

India

Info

Lin

e…

Mahin

dra

Fin

ance

Shrira

m T

ranspor

t

Sundara

m F

inance

Magm

a

Hero

Fin

corp

AB

Capita

l

Baja

j Fin

ance

Manappur

am

Shrira

m C

ity U

nio

n

Muth

oot Fin

ance

Leverage (x)

Source: Company data, I-Sec Research Source: Company data, I-Sec Research


14

Chart 31: Tier-1, though comfortable, is low for few players

Chart 32: Equity raising imminent for many players

53.9

29.0 28.525.4

20.416.6 16.6 14.1 12.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0A

avas F

ina

ncie

rs

India

Bulls

Housin

g

Pira

ma

l E

nte

rprise

s(F

inancia

l S

erv

ices)

Repco H

om

e

CanF

in H

om

es

HD

FC

GIC

Hou

sin

g

PN

B H

ousin

g

LIC

Ho

usin

g

(%)

Tier-1 (%)

26.2

25.3

23.8

23.4

21.3

19.7

17.7

17.6

16.8

15.4

15.4

15.3

14.4

13.6

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Muth

oot Fin

ance

Shrira

m C

ity…

Magm

a

Manappur

am

Baja

j Fin

ance

AB

Capita

l

LTF

H

Sundara

m…

Shrira

m T

ranspor

t

RE

C

Mahin

dra

Fin

ance

Chola

mandal

am

PF

C

India

Info

Lin

e…

Tier-1 (%)

Source: Company data, I-Sec Research Source: Company data, I-Sec Research

However, it is important to understand why the NBFCs/HFCs would still want to raise

equity capital in such an environment:

A fresh equity capital raise in this environment serves as confidence capital in the

existing business model of the NBFC/HFC concerned

In many instances, the capital raise will be necessitated to meet the expectations

of the credit rating agencies (CRAs). In this environment, the CRAs have revised

their outlook on many NBFCs/HFCs to ‘Negative’. While this could be construed

as a precursor to rating downgrade, many rating agencies could have

communicated to the NBFCs/HFCs that, given the expectation of higher credit

costs in FY21, they would ideally want higher tier-1 capital of NBFCs/HFCs in this

uncertain environment to get more comfort on them.

In a few rare cases, raising fresh equity capital could serve as a buffer to preserve

liquidity and the fresh issuance could even be used as a cushion for the high

anticipated levels of provisions that the NBFCs/HFCs would be required to make

in FY21.

Lastly, given that some weak NBFCs/HFCs are available today at beaten-down

valuations, they could become potential acquisition targets and the stronger

banks/NBFCs who acquire them might look to raise fresh equity capital for such

inorganic acquisitions.

We estimate USD3.5-4.0bn of equity raising from shadow banks - call it a risk

capital, preservation capital, confidence capital or opportunity/growth capital.


15

Table 3: Valuation summary

Bank CMP Rating TP P/E (x) P/BV (x) P/ABV (x)

FY21E FY22E FY21E FY22E FY21E FY22E

HDFC 1762 BUY 2345 14.8 10.6 1.5 1.4 1.6 1.5 LIC Housing 245 ADD 285 8.6 5.0 0.7 0.6 0.9 0.7 PNB Housing 205 REDUCE 154 99.7 9.8 0.4 0.4 0.5 0.5 Piramal Enterprises 1082 ADD 1050 17.3 14.2 0.8 0.8 - - Repco 98 ADD 130 3.7 2.8 0.3 0.3 0.5 0.4 Aavas 1132 BUY 1350 32.8 25.6 3.8 3.3 3.9 3.4 Shriram Transport 613 HOLD 732 10.2 6.6 0.7 0.7 1.1 1.0 Cholamandalam 143 BUY 187 9.4 6.9 1.2 1.0 1.4 1.2 Shriram City 633 HOLD 708 5.4 3.9 0.5 0.5 0.6 0.6 Magma Fincorp 14 HOLD 15 66.0 5.8 0.1 0.1 0.2 0.2 L&T Financial 58 HOLD 59 8.8 5.4 0.8 0.7 0.9 0.8

Bank CMP Rating TP RoAA (%) RoAE (%)

FY20E FY21E FY22E FY20E FY21E FY22E

HDFC 1762 BUY 2345 3.7 1.6 1.9 22.0 9.8 12.7 LIC Housing 245 ADD 285 1.1 0.6 1.0 13.5 7.9 12.7 PNB Housing 205 REDUCE 154 1.4 0.0 0.4 13.8 0.4 4.1 Piramal Enterprises 1082 ADD 1050 0.0 1.9 2.5 0.1 4.5 6.0 Repco 98 ADD 130 2.0 1.3 1.6 14.8 9.8 11.7 Aavas 1132 BUY 1350 3.7 3.2 3.4 12.7 12.2 13.7 Shriram Transport 613 HOLD 732 2.0 1.0 1.5 16.2 7.3 10.6 Cholamandalam 143 BUY 187 2.2 1.8 2.2 18.2 13.0 15.4 Shriram City 633 HOLD 708 3.5 2.3 3.0 15.9 10.2 12.8 Magma Fincorp 14 HOLD 15 0.3 0.0 0.4 1.7 0.2 2.4 L&T Financial 58 HOLD 59 1.7 1.3 1.9 12.3 8.9 13.4



16

Appendix

Table 4: CP rollover of NBFCs/HFCs over past 6 months

Dec-19 to Feb-20 (3 months) Mar-20 to May-20 (3 months) Dec-19 to May-20 (6 months)

(Rs mn) Issuance Maturity Rollover (%) Issuance Maturity Rollover (%) Issuance Maturity Rollover (%)

HDFC 1,21,750 1,76,500 69% 90,250 68,000 133% 2,12,000 2,44,500 87% LICHF 27,500 36,500 75% 23,500 24,600 96% 51,000 61,100 83% PNBHF 9,500 22,750 42% - 1,750 0% 9,500 24,500 39% Repco - 750 0% - - NA - 750 0% Aavas - - NA - - NA - - NA BAF 50,145 99,645 50% 1,26,500 1,09,250 116% 1,76,645 2,08,895 85% MMFS 10,000 40,000 25% 7,000 8,000 88% 17,000 48,000 35% STFC 16,500 - NA 2,000 16,500 12% 18,500 16,500 112% Chola 19,500 43,720 45% 16,000 31,000 52% 35,500 74,720 48% SCUF - 750 0% - 4,770 0% - 5,520 0% Magma - - NA - - NA - - NA Piramal 53,050 51,885 102% 15,100 24,550 62% 68,150 76,435 89% Muthoot 45,500 67,530 67% 39,000 48,959 80% 84,500 1,16,488 73% Manappuram 22,750 40,500 56% 24,750 23,250 106% 47,500 63,750 75% LTFH 1,98,750 2,23,870 89% 36,000 42,750 84% 2,34,750 2,66,620 88% PFC - - NA 47,750 30,000 159% 47,750 30,000 159% REC - 18,250 0% 22,500 10,000 225% 22,500 28,250 80% AB Capital 84,600 1,13,700 74% 33,800 88,300 38% 1,18,400 2,02,000 59% Sundaram 21,250 30,670 69% 18,250 31,000 59% 39,500 61,670 64% Tata Motors Finance 63,120 52,250 121% 42,500 55,000 77% 1,05,620 1,07,250 98% Hero Fincorp 24,000 29,750 81% 5,500 16,450 33% 29,500 46,200 64% IndiaBulls - - NA - - NA - - NA CanFin 3,000 9,000 33% 7,500 6,000 125% 10,500 15,000 70% GIC Housing 18,000 18,000 100% 5,500 12,500 44% 23,500 30,500 77% IIFL Finance 18,000 18,000 100% 32,000 32,000 100% 50,000 50,000 100%



17

Table 5: Maturity, Issuance, and Rollover of NCDs for NBFCs/HFCs

Dec-19 Jan-20 Feb-20


HDFC 25,000 22,250 112% 67,050 40,000 168% 95,150 36,430 261% LICHF 7,500 31,020 24% 43,700 26,000 168% 18,500 31,550 59% PNBHF - - NA - - NA - 5,000 0% Repco - - NA - - NA - - NA Aavas - - NA - - NA - - NA BAF - 5,600 0% 17,600 3,140 561% 47,450 3,590 1322% MMFS 2,000 1,000 200% 1,000 2,000 50% 4,050 500 810% STFC - 7,500 0% 1,937 650 298% 22,000 700 3143% Chola 500 5,500 9% 500 - NA 2,600 9,850 26% SCUF - 2,500 0% - - NA 10,000 - NA Magma 3,500 - NA - - NA - - NA Piramal 49,500 - NA 4,500 16,500 27% - - NA Muthoot 12,900 703 1834% 12,900 303 4252% - 2,425 0% Manappuram 7,024 - NA 40 278 14% 11,840 188 6305% LTFH 14,079 15,850 89% 10,706 8,455 127% 35,000 2,350 1489% PFC 47,105 12,200 386% 19,600 17,700 111% 30,000 5,000 600% REC - - NA 36,150 10,000 362% 71,894 10,000 719% AB Capital 1,500 10,600 14% 15,000 34,300 44% 250 1,210 21% Sundaram 2,420 2,000 121% 1,500 3,000 50% 12,500 250 5000% Tata Motors Finance 450 1,000 45% - 10,150 0% 1,950 - NA Hero Fincorp 1,000 - NA - 305 0% 1,000 1,700 59% IndiaBulls - 4,750 0% - 3,000 0% - 11,000 0% CanFin - 3,000 0% - 4,400 0% 2,500 - NA GIC Housing - - NA - - NA - - NA IIFL Finance - 1,750 0% - 175 0% - - NA

Mar-20 Apr-20 May-20


HDFC - 54,980 0% 37,500 12,510 300% 75,000 37,500 200% LICHF - 27,550 0% - 13,750 0% - 21,700 0% PNBHF - - NA - 10,250 0% - 2,350 0% Repco - - NA - - NA - - NA Aavas 4,444 - NA - - NA - - NA BAF 100 8,208 1% 2,000 10,949 18% - 14,533 0% MMFS 4,775 7,750 62% 4,750 5,535 86% 2,000 2,322 86% STFC 6,000 33,200 18% - 29,000 0% 2,500 11,250 22% Chola - 500 0% 4,100 2,290 179% - 6,850 0% SCUF 5,750 2,500 230% - 1,150 0% - 3,500 0% Magma - 350 0% - - NA - - NA Piramal 7,500 1,300 577% - - NA 10,000 7,000 143% Muthoot 5,601 438 1280% - - NA - 984 0% Manappuram 2,000 - NA - - NA 5,000 - NA LTFH 950 7,750 12% 10,750 3,498 307% 8,000 15,620 51% PFC 55,000 - NA 69,500 35,500 196% 1,09,123 25,510 428% REC 72,793 40,000 182% 54,850 4,634 1184% 79,050 5,036 1570% AB Capital - 4,650 0% 8,500 4,955 172% - 15,625 0% Sundaram - 4,750 0% 10,000 600 1667% 1,000 1,000 100% Tata Motors Finance - 5,250 0% - 3,860 0% 10,000 2,000 500% Hero Fincorp 250 - NA 3,500 200 1750% - 4,400 0% IndiaBulls - 8,200 0% 2,000 562 356% 10,300 555 1856% CanFin - - NA - 5,000 0% - 2,000 0% GIC Housing - - NA - - NA - - NA IIFL Finance - - NA - 12,433 0% 1,000 830 120%



18

Table 6: CP Maturity Schedule for select NBFC/HFC

(Rs bn) 1-15th

June 15-30th

June 1-15th

July 15-31st

July 1-15th

Aug 15-31st

Aug 1-15th

Sept 15-30th

Sept Jun-Sep

20

Aditya Birla Finance 9.8 6.3 2.0 5.0 1.0 10.5 - - 34.6 Aditya Birla Housing Finance 2.0 - - - 3.0 0.5 - - 5.5 Bajaj Finance - 19.0 - - 2.5 30.8 - - 52.3 Bajaj Housing Finance - 0.8 - 4.0 - 0.3 0.1 - 5.2 Canfin Homes 3.3 - 3.0 - - 5.0 - 1.0 12.3 Cholamandalam 8.8 - - - - 10.0 - - 18.8 ECL Finance - - - - - - - - - Fedbank Financial Services - 0.5 - - - - - - 0.5 GIC Housing Finance - 2.0 2.0 1.5 - - - - 5.5 Hdb Financial Services 1.3 - - 5.5 - - - - 6.8 Hdfc Credila Financial Services - - 0.3 - - - - - 0.3 Hero Fincorp 3.0 2.0 2.1 3.5 - 2.5 - - 13.1 HDFC 20.0 - 17.0 - 38.5 7.5 30.0 - 113.0 Kotak Mahindra Investments 2.5 2.2 0.5 0.5 - - - - 5.7 Kotak Mahindra Prime 3.1 2.5 1.3 3.0 4.5 1.0 2.0 1.5 18.9 L&T Housing Finance - - - 3.0 - - - - 3.0 LIC Housing Finance 7.0 - - 2.0 7.0 11.0 10.3 - 37.3 M&M Financial Services - - - - - 5.0 - - 5.0 Mahindra Rural Housing Finance - - - 2.0 - - - - 2.0 Manappuram Finance 8.5 - - 6.0 5.0 2.5 - 0.3 22.3 Manappuram Home Finance - - - - - - - - - Motilal Oswal Financial Services 2.5 1.5 - - - 4.0 - - 8.0 Muthoot Finance 11.0 2.5 - 18.5 1.0 6.0 - - 39.0 Pnb Housing Finance 2.0 1.0 0.2 - - - - - 3.2 Shriram Transport Finance Company - - - 2.0 - - - - 2.0 SREi Equipment Finance - - 3.0 - - - - - 3.0 Sundaram Finance 3.0 3.5 7.5 - 5.0 - - 5.5 24.5 Sundaram Home Finance - - 0.5 - - - - - 0.5 Tata Capital Financial Services 4.9 2.3 1.0 7.8 5.0 9.0 - - 30.0 Tata Capital Housing Finance - - - 5.5 7.8 1.0 - - 14.3 Tata Capital - 1.0 - 2.0 - - - - 3.0 Tata Motors Finance 9.5 3.0 - 14.0 - 25.0 - - 51.5 Total NBFCs/HFCs 119.5 80.7 54.5 93.3 87.3 140.8 47.3 14.6 637.7



19

Table 7: Bonds/Debentures maturity schedule for select NBFC/HFC

(Rs bn) 1-15th

June 15-30th

June 1-15th

July 15-31st

July 1-15th

Aug 15-31st

Aug 1-15th

Sept 15-30th

Sept Jun-Sep

20

Aadhar Housing Finance 0.2 1.5 0.5 - - - - - 2.2 Aditya Birla Finance 5.2 2.5 - 0.9 1.0 0.5 - 1.5 11.6 Aditya Birla Housing Finance 0.3 - - - 0.5 - - - 0.8 Asirvad Micro Finance - 0.5 - - - 0.5 - - 1.0 Aspire Home Finance Corporation 0.5 - - 1.0 - - - - 1.5 Bajaj Finance 17.0 9.7 3.0 8.3 12.6 0.2 0.6 0.8 52.1 Belstar Investment And Finance 0.5 - - 0.5 - - - - 1.0 Canfin Homes - - - - - - 1.0 - 1.0 Capital First 0.3 - - - 1.4 - - - 1.7 Cholamandalam 1.5 0.7 - - - - - - 2.2 Dewan Housing Finance Corporation - 1.5 1.5 3.4 0.5 2.2 0.1 5.0 14.1 Ecl Finance 0.3 0.3 0.3 0.2 0.6 - - 1.0 2.6 Edelweiss Finance And Investments - - - - - - 0.2 - 0.2 Edelweiss Housing Finance 0.2 - - - - - - - 0.2 Equitas Finance - - - 0.8 0.8 - - - 1.5 ESAF Microfinance And Investments - - - - - - - - - Ess Kay Fincorp - - - - - 0.4 - 1.5 1.9 Essel Finance Business Loans - 0.3 - - - - - - 0.3 Fivestar Business Finance 0.0 - - - 0.0 - 0.0 - 0.1 Fullerton India Credit Company - - - - 1.6 0.5 - - 2.1 Fullerton India Home Finance Company - - - - - 1.0 - - 1.0 Fusion Microfinance - - 0.3 - 0.4 0.2 - - 0.9 Geetanjali Trading And Investments - 2.5 - - - - - - 2.5 Geo Vpl Finance - - - - - - - 0.0 0.0 Grameen Financial Services - - - - - - - - - Gruh Finance - - - - - - - 3.4 3.4 HDB Financial Services 6.9 7.8 1.3 3.0 6.1 5.0 4.0 4.0 37.9 HDFC Credila Financial Services - - - - - - - 3.0 3.0 Hero Fincorp 4.8 - 2.1 - 0.8 - - 1.5 9.1 Hinduja Finance - 0.5 1.0 - - 0.5 - - 2.0 Hinduja Leyland Finance 0.3 10.3 0.4 - - - - - 11.0 Housing Development Finance Corporation - 78.0 42.2 - - 20.0 20.0 31.0 191.2 India Infoline Finance 0.1 - 0.1 - - - 2.0 1.0 3.2 India Infoline Housing Finance - - - - - 1.2 - - 1.2 Indiabulls Consumer Finance - - - - - - - - - Indiabulls Housing Finance 9.6 0.4 1.2 3.7 0.3 - 10.0 19.3 44.4 Infrastructure Leasing And Financial Services 0.5 - - 3.0 0.5 0.5 0.4 4.5 9.4 Janalakshmi Financial Services - - 0.5 - - - - - 0.5 Kotak Mahindra Investments - 0.3 - 1.8 0.4 - - - 2.4 Kotak Mahindra Prime 5.8 0.2 0.7 3.0 1.5 0.9 2.1 0.1 14.3 L&T Housing Finance 3.6 1.5 - 3.5 - - 1.3 - 9.8 LIC Housing Finance 10.0 27.0 14.9 13.6 2.5 12.5 2.0 15.0 97.4 Magma Housing Finance - - - - - - - - - Mahindra And Mahindra Financial Services 5.5 5.7 5.1 3.9 1.5 0.3 3.8 - 25.7 Mahindra Rural Housing Finance - 0.1 - - - - - - 0.1 Muthoot Finance - 17.8 0.2 - - - - - 18.0 Muthoottu Mini Financiers - - - - 0.2 0.3 - - 0.5 Piramal Finance 4.4 - 1.0 - 1.3 - - 6.3 12.9 PNB Housing Finance - - - - - - - 5.0 5.0 PNY Sabha Finance - - - - - - - - - Reliance Capital 0.2 0.3 - - 0.2 - 0.0 0.1 0.7 Reliance Financial 0.0 - 0.0 0.4 - - - - 0.4 Reliance Home Finance - - - - 0.0 - 0.2 - 0.2 Religare Finvest - - - - - - - - - Repco Home Finance 2.0 - - - 1.8 - - - 3.8 Satin Creditcare Network 0.5 - - - - - - 0.2 0.7 Shriram City Union Finance Company - 1.1 - - - - - - 1.1 Shriram Transport Finance Company 7.2 1.0 1.3 2.3 - 1.3 - - 12.9 Sonata Finance - 0.3 - - - - - - 0.3 Spandana Sphoorty Financial - - - - - - - 12.2 12.2 Srei Equipment Finance - 0.4 - - - - - - 0.4 Sundaram Bnp Paribas Home Finance - 0.3 0.6 - - 0.4 1.5 - 2.8 Sundaram Finance 2.5 - - 1.0 - 6.0 7.5 - 17.0 Tata Capital Financial Services 10.2 6.6 4.2 - 1.9 0.5 - - 23.3 Tata Capital Housing Finance 0.6 0.8 1.4 - 0.3 4.6 - - 7.6 Grand Total 104.5 194.9 89.2 57.1 54.8 83.4 62.0 130.9 776.7



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Table 8: MF holding in CP of HFCs

(Rs bn) Oct-19 Jan-20 Apr-20

HDFC 195.6 130.9 134.3 LIC Housing Finance 57.2 48.2 54.5 Tata Capital Housing Finance 29.1 20.2 28.5 Canfin Homes 21.4 14.0 10.6 Bajaj Housing Finance 39.1 43.8 10.6 L&T Housing Finance 13.9 2.9 6.0 Sundaram Bnp Paribas Home Finance 5.9 6.6 3.7 Aditya Birla Housing Finance 6.9 3.5 3.0 GIC Housing Finance 12.5 12.4 2.0 Mahindra Rural Housing Finance 2.0 1.0 2.0 PNB Housing Finance 20.9 10.4 - Indiabulls Housing Finance 2.1 - - Tata Value Homes 1.0 1.0 - Hero Housing Finance 1.0 0.5 - Piramal Capital And Housing Finance 0.2 0.2 -


Table 9: MF holding in CP of NBFCs


Tata Motors Finance 36 45 40 Muthoot Finance 48 48 37 Tata Capital Financial Services 37 32 31 Manappuram Finance 38 32 25 Hero Fincorp 32 26 20 Kotak Mahindra Prime 40 31 19 L&T Finance 30 29 18 L&T Infrastructure Fin 27 13 14 Axis Finance 6 12 13 L&T Finance Holdings 17 12 12 Aditya Birla Finance 24 21 10 Cholamandalam 60 34 10 Bajaj Finance 85 10 10 Barclays Investments 7 9 10 Birla Group Holdings 20 24 10 Standard Chartered Investments 13 15 10 Sundaram Finance 19 14 9 Fullerton India Credit 20 14 9 Julius Baer Capital (India) 7 10 8 HDB Financial Services 16 12 8 Deutsche Investments India 10 10 7 Kotak Mahindra Investments 13 16 7 Motilal Oswal Financial Services 8 10 6


Tata Capital 7 2 5 TMF Holdings - 3 5 Piramal Enterprises 6 5 4 Tata Motors Finance Solutions 6 9 2 HDFC Credila Financial 5 6 2 Bahadur Chand Investments 8 20 2 HSBC Investdirect Financial 3 2 1 SBI Global Factors 6 5 1 Aditya Birla Money 1 4 1 Sharekhan Bnp Paribas Fin 1 1 1 M&M Financial Services 31 17 - Hinduja Leyland Finance 14 6 - Daimler Financial India 3 - - John Deere Financial India 3 3 - Indostar Capital Finance 2 - - Shriram City Union Finance 1 0 - Toyota Financial Services India 1 - - Volkswagen Finance Private 1 - - Phoenix Arc Private 1 1 - Clix Capital Services Private 1 1 - Shriram Transport Finance 0 16 -


Table 10: MF holding in CP of Corps


Reliance Industries 87 114 315 Reliance Jio Infocomm 266 302 277 Indian Oil Corporation 131 107 223 Bharat Petroleum Corporation 10 - 87 NTPC 126 93 82 Vedanta 118 117 56 Hindustan Petroleum Corporation 17 36 56 The Tata Power Company 57 51 53 Tata Teleservices (Maharashtra) 36 36 37 JSW Steel 49 46 35 Chennai Petroleum Corporation 41 27 32 Nabha Power 25 12 29 Tata Motors 33 20 29 Steel Authority Of India 58 57 28 Larsen And Toubro 57 49 26 Tata Teleservices 7 9 26 Tata Steel 20 47 24


Bharti Airtel - - 20 Oil And Natural Gas Corporation - - 20 Bharti Hexacom 5 17 15 Bharat Heavy Electricals 34 29 12 National Fertilizers 39 51 11 Aditya Birla Fashion And Retail 11 10 10 Kotak Securities 18 19 10 Sun Pharmaceutical Industries - 5 10 Tata Housing Development Co 8 8 9 Godrej Industries 5 6 8 Godrej Properties 8 11 8 Tata Realty And Infrastructure 18 14 8 Tv18 Broadcast 6 7 7 Sbi Cards And Payment Services 36 30 2 Bharti Telecom 9 10 2 Tata Sons 55 34 - Adani Ports And Sez 64 66 -


https://www.aimin.co/watchlist/issuerDetails/id/1421














21

Table 11: MF holding in NCD of NBFCs


Bajaj Finance 78 89 86 HDB Financial Services 82 86 69 Shriram Transport Finance 58 57 52 Muthoot Finance 50 49 45 L&T Infrastructure Finance 4 16 44 Kotak Mahindra Prime 53 50 44 M&M Financial Services 54 49 41 Sundaram Finance 35 36 37 Aditya Birla Finance 24 24 25 Edelweiss Commodities Services 27 25 23 Tata Capital Financial Services 22 22 22 L&T Finance 20 19 19 Manappuram Finance 4 11 19 Axis Finance 17 17 19 Fullerton India Credit 16 16 19 Indostar Capital Finance 19 18 18 Piramal Enterprises 16 19 17 Cholamandalam 21 17 16 TMF Holdings 10 16 16 Shriram City Union Finance 18 18 15 Hinduja Leyland Finance 19 17 14


Clix Capital Services 12 12 12 Tata Capital 4 8 11 Bahadur Chand Investments 12 4 11 KKR India Financial Services 19 17 9 John Deere Financial India 8 8 8 Shriram City Union Finance 4 2 7 Fivestar Business Finance 7 7 7 Avanse Financial Services 2 5 5 Shriram City Union Finance - - 5 Hero Fincorp 7 5 5 Volkswagen Finance 5 5 5 ECL Finance 7 5 4 Kotak Mahindra Investments 8 8 4 Tata Motors Finance 20 11 4 Daimler Financial Services India 4 4 4 Edelweiss Agri Value Chain 4 4 4 Piramal Finance 3 3 3 Small Business Fincredit India 4 4 3 Visu Leasing And Finance 3 3 3 Credila Financial Services 5 5 2


Table 12: MF holding in NCD of HFCs


LIC Housing Finance 332 380 312 HDFC 311 400 299 Bajaj Housing Finance 38 39 41 Tata Capital Housing Finance 12 27 26 PNB Housing Finance 18 20 16 Indiabulls Housing Finance 31 16 12 L&T Housing Finance 7 16 11 Reliance Home Finance 5 3 9 Aspire Home Finance Corp. 10 10 8 Mahindra Rural Housing Finance 8 9 7 Piramal Capital And Housing Fin. 10 7 7 Aadhar Housing Finance 1 5 6 Iifl Home Finance 7 6 5 Fullerton India Home Finance 5 5 5


Sundaram BNP Paribas Home Fin 4 7 5 Aditya Birla Housing Finance 5 5 5 Tata Value Homes 4 4 4 Aptus Value Housing Finance India 5 5 4 India Infoline Housing Finance 8 7 4 Canfin Homes 2 2 3 Edelweiss Housing Finance 2 2 2 Vastu Housing Finance Corporation 4 4 2 Dewan Housing Finance Corp 5 3 2 India Shelter Finance Corporation 2 2 2 Gruh Finance 1 1 1 Ashiana Housing 1 1 1 Aavas Financiers 1 1 0 Shriram Housing Finance 0 0 0 Hero Housing Finance 0 0 0


Table 13: MF holding in NCD of Corps


Reliance Industries 143 154 167 Power Grid Corporation Of India 74 79 83 Vedanta 66 89 80 Larsen And Toubro 34 44 72 NTPC 51 45 63 Reliance Jio Infocomm 57 54 54 HPCL 37 41 51 Tata Sons 89 78 47 Bharti Telecom 31 37 44 Indian Oil Corporation 0 21 40 Nabha Power 36 49 38 Reliance Utilities And Power 34 34 30


Coastal Gujarat Power 34 35 30 Tata Motors 22 29 25 India Grid Trust 24 24 24 Pipeline Infrastructure 28 29 24 Embassy Office Parks 17 25 23 Talwandi Sabo Power 29 26 23 Mangalore Refinery - 17 20 Ongc Petro Additions 29 30 20 Indinfravit Trust - - 15 Idea Cellular 20 5 2 Adani Transmission 10 6 1 Vodafone Mobile Services 14 1 1



22

Table 14: Despite comfortable Tier-1 capital, de-leveraging to continue; alluring valuations may make some of them potential acquisition targets

Company Leverage

(x) Tier-1

(%) 3-yr AUM

CAGR (%) M-Cap/AUM

(x)

RoA (%) RoE (%)

FY19 FY20[e] FY19 FY20[e]

HDFC 6.1 16.6 15 0.59 2.2 3.7 13.5 22.0 LIC Housing 11.9 12.5 14 0.06 1.3 1.1 15.9 13.5 PNB Housing 10.2 14.1 31 0.04 1.6 1.4 16.9 13.8 Repco Home 7.1 25.4 10 0.05 2.3 2.0 16.5 14.8 Aavas Financiers 3.7 53.9 43 1.14 3.6 3.7 11.6 12.7 Bajaj Finance 5.1 21.3 35 0.94 4.1 4.1 22.5 20.2 Mahindra Finance 6.5 15.4 15 0.14 2.6 1.3 15.2 8.1 Shriram Transport 6.2 16.8 13 0.13 2.0 2.0 17.5 16.2 Cholamandalam 7.8 15.3 21 0.19 2.3 2.2 21.0 18.2 Shriram City Union 4.3 25.3 9 0.14 3.5 3.5 16.6 15.9 Magma 5.9 23.8 0 0.02 1.9 0.3 12.9 1.7 Piramal Enterprises 3.7 28.5 27 0.47 3.1 0.4 15.0 1.9 Muthoot Finance 4.2 26.2 18 0.84 2.2 2.0 14.1 10.0 Manappuram 5.0 23.4 23 0.45 4.9 5.9 19.2 22.9 LTFH 7.3 17.7 14 0.12 2.5 1.7 17.9 12.3 PFC 7.5 14.4 12 0.06 2.2 - 17.3 - REC 8.5 15.4 17 0.06 2.1 - 17.3 - AB Capital 5.2 19.7 17 0.21 1.9 2.0 13.7 13.5 Sundaram Finance 6.0 17.6 13 0.44 2.1 2.3 13.2 13.7 IndiaBulls Housing 6.1 29.0 4 0.05 3.0 2.4 24.0 14.7 CanFin Homes 10.2 20.4 16 0.20 1.8 2.0 18.2 19.7 GIC Housing 10.7 16.55 14 0.03 1.3 0.7 15.2 8.8 India InfoLine Finance 7.2 13.6 19 0.07 2.2 2.2 17.5 16.9



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Price charts

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24

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