Ajay Piramal, chairman of Piramal Group, spoke to CNBC-TV18 about the current turmoil in the non-banking financial companies (NBFC) sector.
“I think we should understand what is happening in the NBFC sector. We had a meeting of analyst for half a day on August 30th where there were more than 300 fund managers and analysts. When I was speaking to them, this is one big risk that I saw in the sector. I said that if there is any blow up in an NBFC, that will affect the whole sector,” said Piramal.
Talking about the crisis at IL&FS, Piramal said, “I said there could be a blow up is because, firstly, I find that many of them don’t have high governance standards. The second thing is that many of them are not worried about the asset quality as much as it is of the valuation because promoter stakes in some of these companies is either absent or it is so low that people just want to cash out. This is what has happened today. When you look at what triggered this whole crisis in the market, it was because what happened with IL&FS, there was no promoter there, the stakes are so low and therefore, I think the asset quality is questionable."
“We keep looking at many businesses and everyday there is a new proposal that we look at, it doesn’t mean that we are going to go ahead with these proposals. As of now we have not looked at IL&FS in this present state and we do not have any intention of doing that,” said Piramal.
“We are very selective as far as our investments are concerned. 90 percent of our investments have given us a good return. So we just want to keep maintaining that sort of record,” he added.
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