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MOSL: Morning India (8/June/18): 1. Financials – NBFC (FY18 a good year, but outlook divergent); 2. Voices | India Inc on Call

MOrning India (8/June/18): 1. Financials – NBFC (FY18 a good year, but outlook divergent); 2. Voices | India Inc on Call

 

Today’s top research idea

Financials - NBFC: FY18 a good year, but outlook divergent; FY19 likely to be a good year for vehicle financiers, but tough for HFCs

• FY18 was a good year for most NBFCs under our coverage. Rebounding from demonetization-period lows, growth was strong across segments.
• Asset quality was stable for housing finance companies (HFCs) and improved for vehicle financiers.
• To mitigate the impact of rising GSec yields, some smaller HFCs migrated their incremental borrowings toward the shorter end of the curve, where rates are 50- 100bp lower.
• In our view, further migration to short-term borrowings may not be possible, and HFCs will have to bear the brunt of rising rates.
• Vehicle financiers had an excellent FY18, with growth rebounding and asset quality improving materially.
• They are also well-prepared for FY19 and beyond by investing significantly in branch network expansion. Our top picks are SHTF, HDFC, PIEL and LTFH.

Piping hot news

10-yr bond yields surge to highest since May 2015, may cross 8% mark

• The yield on 10-year government bonds on Thursday closed near 8% mark—first time since December 2014, a day after the Reserve Bank of India (RBI) raised key interest rates and change liquidity coverage norms.