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Why Aditya Birla AMC’s Mahesh Patil Is Bullish On The NBFC Sector

The “big will get bigger” phenomenon didn’t start with Covid-19 says Mahesh Patil.

An employee walks past an electronic board that indicates the latest stock figures at the National Stock Exchange in Mumbai (Photographer: Dhiraj Singh/Bloomberg)
An employee walks past an electronic board that indicates the latest stock figures at the National Stock Exchange in Mumbai (Photographer: Dhiraj Singh/Bloomberg)

As most investors agree that big companies will keep getting bigger in the pandemic-rearranged economy, Mahesh Patil expects non-bank lenders to be among those that'll benefit the most.

"Over the last decade we have seen mushrooming of NBFCs (non-bank financial companies). Now after the NBFC crisis and the Covid crisis, you will see smaller ones shut down and others getting consolidated,” the co-chief investment officer at Aditya Birla Sun Life Asset Management Company told BloombergQuint in an interview. “Only a handful will survive, so that's clearly an emerging space.”

The consolidation drive across various sectors in India, according to Patil, started with demonetisation, increased with the implementation of the goods and services tax and is continuing amid the pandemic. Larger companies, which have the bandwidth to expand faster, digitise quickly and keep up with the changing trends, will gather market share at the cost of weaker ones, he said.

Why Aditya Birla AMC’s Mahesh Patil Is Bullish On The NBFC Sector

This comes even as the financial sector faces the risk of rising bad loans due to loan moratoriums amid the coronavirus pandemic. Businesses shuttered and millions are left jobless as the novel virus outbreak forced the nation to impose the world's biggest lockdown. That pushed the economy toward its first annual contraction in more than four decades. To provide relief to borrowers, the Reserve Bank of India allowed lenders to offer a moratorium on loan repayments for six months. That may lead to a jump in the country’s bad loan ratio, already the world’s worst.

Still, that didn't deter Patil from saying that large private banks which are “strong on their liabilities side” will also be well positioned to gain.

Besides the financial sector, Patil expects consumer discretionary, particularly auto and jewellery, to see a rally.

Watch the full conversation here: