Again a click bait. There is no crisis in the Nbfc space. There have always been well managed banks and badly managed banks. Banks with no political interference, and banks run by politicians.

ILFS and IDFC were NEVER in the well managed category. Hopefully with the banking license under its belt, IDFC may have cleaned up its books, but that I will never know.

ILFS is not a well run organisation. I thought everybody knew that. Some of the big people in the BFSI place knew and were allergic to ILFS. In the BFSI space I do not matter, but I can count on my fingers a few people with whom we could laugh about ILFS. Anyway that is history. Sucheta and Debashis kept writing and asking about the coterie that was running ILFS. Most of us had seen the contracts of the Noida Toll Bridge and how it was not a value buy EVER. I have had discussions about NT Bridge with one of the best value investors and I felt it was not worth it. I have not seen his portfolio to see whether he still has it…

The well managed NBFC also make mistakes. For example Cholamandalam Investment and Finance also entered the mutual fund space, but quickly got out when it was not worth it.

Well managed Nbfc are normally run by people who have sweat equity and/or are the owners themselves. Bajaj, Cholamandalam, Equitas (bank), Kotak, Sundaram Finance, Dewan Housing……are the few companies that fit that criteria. I have seen the cash availability with these organisations…even recently, and I do not think that there is anything that we missed…

I do like many of them..and I am not interested in nit picking which Nbfc will do well.

However, most of you know HOW to read a balance sheet. I know Nbfc which will vacate an area which is crowded and the margins are thinning. I know Nbfc which will just go deep and create greater relationships during bad times. I know one Nbfc with a big auto portfolio which gives loans even for driver’s daughter’s wedding…KNOWING THAT THE WORKING CAPITAL will get diverted. It is just a matter of great relationships.

All these companies which are well managed are run by professionals but the strategic decisions are taken by the OWNER MANAGERS. Also understand that the owner has to have the ability to understand the business. There are 2 big Nbfc which look like owner run, but the owners are too far away from the day to day running. I can assure you that the managers are damaging the business. No names please.

Dewan Housing has a good balance sheet. It has a lot of cash, and undrawn reserves. Best is they get money from the bottom of the pyramid..and lend to them. This means their NIM is well protected. They also are now entering the mutual fund and life insurance space. Surely they will find a way to create a retail network and will cater to the bottom of the pyramid.

The advantage of selling to the bottom of the pyramid is that they are not constantly comparing the service provider with the next service provider….

PS: I could be holding shares in Cholamandalam, Kotak, Dewan, Hdfc…..and any other company mentioned in the post.