Do Not See Any System Risk From IL&FS Default, Edelweiss Says

The liquidity crisis caused after a recent default by Infrastructure Leasing & Financial Services Ltd. will not lead to a systemic risk. That’s according to Edelweiss Financial Services Ltd. which expects loan growth for non-banking finance companies to moderate over the next 12 months.

Here are key takeaways from the Edelweiss’ Investor Meet 2018 by Morgan Stanley

IL&FS Impact

• Management does not see any systematic risk on the asset side due recent liquidity crisis caused by the IL&FS event.
• It expects loan growth across NBFCs to moderate over next year.
• May increase liquidity cushion from 10 percent of assets to 15 percent.
• Asset quality deterioration in industry unlikely.
• Focus remains on wholesale credit via fee-based funds, rather than through its balance sheet.

Other Takeaways

• NCLT process taking time in the courts, do not expect inordinate delays.
• Realisable of some assets going up, seeing higher bids for certain assets.
• Unsold residential real estate inventory levels declining.
• Commercial real estate continues to do better.
• Total expense ratio change for mutual funds to have negligible impact on profits.
• Remains bullish on opportunities in alternative assets.
• Expect cost to income ratio of 40 percent over the next two-three years as compared to 46 percent (excluding insurance) last year.