Disruptions and Opporutunities in Micro-Lending, and its effect on dependent sectors
In couple of months after the lockdown ends, new clients won’t be added. Ground zero will be touched first. Due EMIs will be sought, and damage assessment will be made.
Low PBv stocks may not make it: Equitas, Indostar and unlisted ones. I am equating low PBV with low “quality” of the underlying business.
Good businesses will face setbacks: pressure from Political parties to bear losses, willful defaults.
It is absolutely clear that lofty valuations will normalize, and may even go into discount. Like in case of Bandhan Bank.
Bajaj Finance was trading at lofty valuation owing to its future growth. Now, in absence of growth prospects for atleast next 2 quarters it appears a P/Bv of 6.20 is unsustainable. However, there is a silver lining, due to this calamity mediocre businesses will lose ground and the sound-ones will cover it when the going gets good.
The online business will be hampered. Micro-Financing, as a facilitator, will be on the back-foot causing the sales to drop. As a result, Consumer Durables like Voltas, Whirpool, Symphony will take a direct hit.
There are reports of MSME businesses being in trouble, a section to which Sarkarri Banks, HDFC Bank and Kotak Bank have sizeable exposures. But again, Sarkari Banks will lose ground and their private counter parts will cover it in good times.
I see many people blindly switching to Pidilite, but I feel due to real estate slump and the stocks lofty valuations a decent fall is on the cards.
Finally, due to de-migration of labour, agriculture might see a spike Because a labour when he goes to his home town, he resorts to agriculture for sustenance.