Kotak remains bullish on NBFCs, citing strong domestic economic growth and resilience to global uncertainties. “Companies have grown at 20% to 30-35% and continue to still remain reasonably high growth stories,” Chawathe added.
He has a positive sector outlook on the sector, though some moderation in growth is expected. However, asset quality remains stable.
In the affordable housing finance space, Kotak sees opportunities in Aadhar Housing, Aavas Financiers, Home First, and Aptus, where they expect further upside.
Chawathe also discussed the latest developments in Bajaj Finserv. He said it has primarily resulted in a change of ownership, with new investors stepping in, but without any significant impact on Bajaj Finserv shareholders from a sum-of-the-parts (SOTP) or valuation standpoint.
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Since these are promoter-driven companies, Bajaj is fully capable of managing the businesses independently, and the transition is unlikely to affect operations.
According to Kotak, the transaction was executed at a valuation approximately 8% to 28% lower than certain fair value estimates for the deal.
Chawathe believes, asset quality in the microfinance sector is still evolving and requires close monitoring. In the personal loan segment, market insights suggest that stress levels may have peaked, though it remains an area to watch.
However, most large listed companies have minimal direct exposure to personal loans, aside from a few exceptions, providing some level of reassurance.
Other lending segments have experienced a slowdown, with certain companies seeing a rise in delinquencies, particularly in commercial and vehicle financing, albeit from a low base.
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