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Full impact of COVID will show up in banks books at some point, cautions Dalton Cap's Bhat

Updated : October 08, 2020 13:06:07 IST

The economic impact of COVID-19 is yet to be seen in full force, UR Bhat, Director,  Dalton Capital Advisors said in an interview with CNBC-TV18.

“The numbers in terms of COVID-19 affected people are increasing and new infections are also not exactly very comfortable even though the trend has probably reversed a bit. But the economic impact of this is yet to be seen in full force,” he said.

Bhat further added that although the market has factored in all the good news, one needs to be cautious at current levels.

Speaking about the banking sector, Bhat said the stress was not being fully recognised at this point.

"If you do your business well, I think there is enough growth in the market available for you to capture. I think the stress in the system is something that has been pushed to the background as it were," he said.

"So, one hopes that this stress might be resolved because there is one good indicator that quite a few of the bank chiefs are saying that the number of applications for restructuring are very minimal if any. So, it probably gives some confidence that the companies are probably not affected as much as we thought earlier because they don’t need the restructuring.

They are feeling that things will improve and they will be able to service the debt quite well. So, if that is an indicator things might be fine, but otherwise the sort of numbers that we are talking about in terms of the affected persons, in terms of lost business, it has to show up somewhere and I think the banking system on the asset side is where it will eventually show up even though we may not recognize at this stage.”

Bhat is not convinced about the recovery that many companies are talking about.

“What companies are saying is that they have recovered 85-90 percent from where they were. But if you really compare year-on-year (YoY), they are still 5-15 percent down. So, instead of saying 5-15 percent down, they are saying they have recovered 85-90 percent,” he said.
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