INSUBCONTINENT EXCLUSIVE:
The stock of Indostar Capital, a mid-cap nonbanking financial company (NBFC), has nearly halved from its IPO listing price of Rs 600 on May
21 following liquidity crunch in the banking system and rising concerns over the asset quality of the sector.
The stock is now available at
availability due to the recent initial public offering, strong management, and gradual improvement in liquidity in the system.
Over the past
two months, the stocks of several NBFCs have taken a hit after the default of Infrastructure Leasing and Financial Services (ILFS) on
several bank loans and commercial papers and subsequent downgrading of its loans to junk status by credit rating agencies from the
investment grade rating earlier.
A major concern is the asset-liability mismatch of these lenders, wherein short-term borrowings tend to
support their long-term loan assets such as mortgages.
While asset-liability mismatch casts a shadow on the lending sector, the management
of Indostar Capital claims to be on a better footing
disbursements over two-and-a-half months.
Indostar has also improved asset quality over the past few quarters
Its gross nonperforming assets (GNPA) ratio stood at 0.9 per cent in the quarter ended September, compared with 1.9 per cent in the
corresponding quarter a year ago.
The proportion of the retail segment in the assets under management increased to 37 per cent during the
quarter from 22 per cent during the yearago quarter.
Its retail exposure consists of vehicle finance, affordable housing loans and lending
levels of 5 or 6 for some of its peers.
The low leverage gives comfort amid the scenario of tight liquidity
healthy net interest margin of 8.6 per cent and sustained growth in its assets under management.
This may bring the stock back on the radar
