MOSL: Morning India (08/October/18)-1. Financials – NBFC (Regulatory scrutiny likely to increase); 2. EcoScope (RBI maintains status quo, changes stance to tightening); 3. Preview 2QFY19 (a. Automobiles; b. Ban
MOrning India (08/October/18): 1. Financials – NBFC (Regulatory scrutiny likely to increase); 2. EcoScope (RBI maintains status quo, changes stance to tightening); 3. Preview 2QFY19 (a. Automobiles; b. Banks; c. NBFC)
Today’s top research theme
Financials - NBFC : Regulatory scrutiny to increase; RBI concerned with increasing ALM mismatch in NBFCs
- In its recent monetary policy statement, RBI highlighted its concern on increasing ALM mismatch by NBFCs. In our sector update in June (Click here for report), we had highlighted how some HFCs migrated their incremental borrowings towards the shorter end of the borrowing curve, where rates were 50-100bp lower.
- Our interaction at the industry level suggests that the market is gradually normalizing from the liquidity freeze post the IL&FS crisis.
- Cost of funding remains elevated for all players. However, we remain ardent supporters of the NBFC growth story given their vintage, niche product and target segment and lack of participation from PSU Banks.
- We recommend investing in companies with strong banking/financial relationships, good credit rating and reasonable pricing power. Our top picks remain HDFC, LTFH and SHTF.
Piping hot news
Reliance hikes petrochemical prices to offset rising oil
Reliance Industries Ltd (RIL) raised prices of at least seven key petrochemicals in the last quarter to offset higher crude oil prices and counter the effect of a weakening rupee. Bulk chemicals traders, suppliers for RIL’s petrochemical products and analysts tracking the company said it raised prices by 10-21% in the second quarter of this fiscal while year-on-year increase is 17-61%. These products include purified terephthalic acid (PTA), monoethylene glycol (MEG), polyester staple fibre (PSF), partially oriented yarn (POY), polypropylene or high density polyethylene (HDPE) and linear alkyl benzene (LAB).
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