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market | IST

Credit Suisse says worried about lack of growth in NBFC space

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Credit Suisse, on Monday said it's worried about the lack of growth in non-banking financial companies space.

Global brokerage, Credit Suisse, on Monday said it's worried about the lack of growth in non-banking financial companies (NBFCs) space as balance sheets of several firms in this sector are smaller than they were in September.
In an interview to CNBC-TV18, Neelkanth Mishra, managing director and India Equity Strategist, said, "Indian NBFCs are very well capitalised. We are talking about assets to equity at 4.5 for the NBFCs and 7.5-8 percent for the housing finance companies (HFCs). So there is no risk of cascading defaults and the whole system shutting down."
Mishra said, "In our market, everyone is looking at investment stocks, investment revenues and it so happened that it coincided with decline in industrial earnings and price to earnings as well."
"We investigated this. In the last six quarters gross fixed capital formation (GFCF) to gross domestic product (GDP) ratio has been climbing steadily. The question was can they sustain,” he added.
"If you drill down into GFCF, then most of the slowdown has come from the informal sector. In fact, private corporate capex has been growing in the mid-teens at 14 percent compound annual growth rate (CAGR) and the machinery capex was up only about 10 percent,” he further added.
Pronab Sen, former adviser of Planning Commission, said private capex has been reasonably high and it hasn't accelerated, but it’s substantial, "The real fall has come in the household sector, which is the unorganised sector capex,” he said.