Employees are reflected in a glass panel as they use desktop computers while monitoring data at a securities brokerage in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

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 value 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.