ilmscore | Prediction Details
"So, that's where your alpha gets created probably the lending part. So financials include lending and non-lending. But that comes under a bank stock or you know. Yeah. bank, NBFC, whatever you know anything that is lending. We've been big underweight for the last six seven years and it has helped us create alpha. See our only sense is uh is that India is a credit hungry country. Right. Right. The need for money is always going to be there. Right. But the need to buy houses and cars will always going to be there and more and more people like you said uh they are um the GDP per capita of the country is increasing. So that hunger to do a lifestyle upgradation is there. So I need to buy houses and cars which is going to take the biggest wallet share. Sure. It's it's almost impossible that all of these Indians can buy these these things outright, right? So by that logic, don't you think that and we are a young population also, right? So by that logic, don't you think that the banking sector should flourish? So let me put it this way. We like any sector uh which is consolidating where the number of players are actually coming down. We are wary about any sector which is fragmenting where the number of players go up because once a sector starts fragmenting your pricing power goes down dramatically. But RB is not giving away more banking licenses. No but if you think of it the number of lenders have gone through the roof in the last 10, five years, 7 years. How can you give an example? Number of banks have come through small banks, MFIs. Okay. Then there were PTM wallets which came. Then the the evolution of you know buy now pay later fintex. So it is just not banks. The access to credit has gone up dramatically. You're right. Today most fintech companies have gotten into personal loan lending. Absolutely. That's the biggest part of their revenue. Absolutely. So the competitive intensity is extremely high there. Okay, that is one. Secondly, this is only the personal side. Now you think on the corporate side or the lending side to corporates etc. What is very very uh surprising is India uh the way corporate India has deleveraged or reduced their balance sheet debt in the last 5 years it's phenomenal. I'll give you an statistics. uh when I look at the small and midcap segment in India or the small and micro cap segment okay their balance sheets today are cleaner than the large and midcap put together on a debt to equity so that means corporate India is extremely deleveraged they don't have debt in fact a lot of segments have cash sitting out there now if you have got cash sitting out on a balance sheet why would a company borrow you know they've got their own cash in fact the banks are pained because they'll have pay interest on this money which is lying with them. Okay. But these bank when they need money they actually don't go ahead and borrow from the banks. They use their own balance sheet strength to do go ahead and do KPX etc. The second thing that we are observing very very clearly company corporate India is a little weary about taking debt. So they go ahead and dilute equity the listed guys at least to do whatever capex is needed and then they fund it through internal accruals. So on the corporate lending side the growth is also subdued. So competitive intensity low growth on this side is something that we believe the roc's roe will not expand. It is very difficult just because of pure competitive intensity. And the third part of it is last one or two years the banking balance sheets are pristine today in terms of how clean it is. In a cycle it can only get dirty from here. Okay. So the NPA cycle starts picking up over a period of time. So in such a case it becomes very difficult for me to justify. They would be trading buys and sells once in a while here and there. But over a period of time can financials actually lending I'm not talking the non- lending part. The lending financials can they go go ahead and create wealth for you? Very unlikely."
By Finance With Sharan | November 29, 2025 | Pending
From video
Where to Invest NEXT: A Clear Sector Guide for Beginners & Advanced Investors ft. Anirudh Naha FWS81 00:32:39 - 00:36:52
Interpreted Prediction
The lending side of the financial sector is expected to underperform and is unlikely to create significant wealth. This is due to high competitive intensity from increasing numbers of lenders (including fintech and BNPL), subdued growth in corporate lending due to deleveraging, and the potential for deteriorating balance sheets which could lead to an NPA cycle.

Prediction Details

Topic
Indian Financials (Lending Sector)

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