India in an early to mid-stage of a credit cycle: Sunil Subramaniam
Sunil Subramaniam, MD & CEO, Sundaram Mutual, says “the initial part of the credit cycle growth will be led by the NBFC pack. On top of this, we are now heading into the festival season. Then in the summer, there will be demand for consumer durables. It is the election season and you will have lots of liquidity flooding the economy. So the consumption drive is also on the back of NBFCs as a clear lead over banks in terms of lending at the consumer and the retail end of it.”
You understand the NBFC space so closely. In fact, one of your group companies is a big NBFC, very successful. They have been talking of a very high quality, sustainable growth going forward and one of the few NBFCs which is trading at a 52-week high. Which phase of the cycle are the top NBFCs in? Most of them are guiding towards 20%, 25% growth, while some SME ones are talking about 30-35% growth. Is it early cycle, mid-cycle or late cycle?
I would say early to mid-cycle because as corporate capex goes up, banks generally come in at a late stage to finance.
So a lot of the initial bridge financing, the loans against shares, the loans against real estate, in order to bridge the gap. Promoters, when they are looking for funding, are hesitant to bring in the equity until the last stage. They would like to wait for that.
Banks insist on that coming in.
In the early stage of a capex cycle booming, it is the segment players like NBFCs, which have a quick turnaround time, and good quality NBFCs need to have the balance sheets to support these. And then the funding sources.
