IT attractive in long term; retail credit growth to continue: Pramod Gubbi

economictimes.indiatimes.com:

Pramod Gubbi, Co-Founder, Marcellus Investment Managers, says “like always the credit cycles will peak out either because there is an event in the economy or lenders have gone overboard in terms of lending but at this stage, It looks like a Goldilocks situation where demand is pretty strong, asset quality concerns are not that grave. Therefore, we should continue to see this sort of growth in retail credit.”

I would like to talk to you about the small ticket loan space. After Q2 updates, Poonawalla Finance was 150% higher YOY. Today, U GRO came out. Five Star Business also recently hiked their guidance. One is getting a sense that after GST, Jan dhan, Aadhaar and mobile phones, small ticket loans for enterprises, SMEs or even individuals, are getting deeper into the country. It is like a satirisation of what happened in the consumer space a few years back with Rs 2 shampoo sachets, Rs 5 biscuit packets. Or do you see this as a risk also because in this business, collection is a bigger issue and not giving loans?
A lot of people are scratching their heads around this.

This is perhaps the most aggressive retail credit boom that we have seen in the country for a long time. We speak to people on the ground, distributors of loans and clearly everybody is surprised by the strength of demand for retail loans. I think there are a few structural drivers which are driving sustained credit penetration in consumers.

One, with access to data, lenders are better able to assess the risk of the borrower. Also, there are structurals changes in terms of Indians culturally are becoming more and more open to borrowing even for consumption.

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