Anil Singhvi finds small and PSU NBFCs as attractive from valuation perspective

Zee Business Managing Editor after decoding the good prospects of non-banking financing companies (NBFCs) in the backdrop of the recent steep repo rate cut and CRR reduction, now delved deep into the space to find out which stocks within the space are trading at attractive valuations.

But before that here is a summary of why he finds NBFC as attractive investment bets now

Why Anil Singhvi finds NBFC as the best sector for investment now?

Anil Singhvi believes that after the RBI has cut repo rate by a sharp 50 basis points - NBFC or non-banking financial institutions will be able to secure loan at a much lower rate. 

Additionally, with a cut of 1 per cent or 100 basis points, liquidity crisis in the system will be taken care of and growth of credit is likely to be spurred at a good rate.

Besides, Singhvi finds valuations of a select set of NBFC stocks to be highly attractive. Also, importantly, RBI is slowly and gradually removing and relaxing the different regulationary curbs for these NBFCs.

The expert added that some of the companies in the NBFC space are available at a price to book value of less than 1, others at a price to book value of less than 2 and likewise.

Expert decodes valuation of NBFCs

As per Singhvi big names within the space are trading at reasonable valuations say stocks like Manappuram Finance and AB Capital among others are trading at reasonable valuations, while he concluded that small names are trading at attractive valuations.

Book value means the company's net worth, computed by subtracting total liabilities from total assets. It essentially reflects the value that would  be there for shareholders if the company has to be liquidated.

           Book value 
IIFL           1.4
Ab Capital     2
L&T Fin      1.8
PEL            1
Manappuram 1.7

So, stocks like AB Capital and Manappuram Finance are trading at a book value of between 1-2.
 

Small NBFCs lik SG Finserv, Northern Arc trade at attractive valuations'

The analyst held that small cap companies are available at attractive valuations.

                    Book value 
SG Finserv    0.3
Fusion Micro  2.1
Indo Star       1.3
Northern Arc   1.0

Similarly, he finds PSU NBFCs also trading at good valuations 
                बुक वैल्यू
LIC Housing      0.9
PNB Housing     1.7
Can Fin Homes     2.1