The NBFC business hasn't seen a visible disturbance after the liquidity crisis, whether in terms of loan growth or asset quality. However, when compared to past performance, the March quarter (Q4) wasn't satisfying. Loan growth at 34 per cent lagged that of previous quarters at 45-85 per cent. Similarly, gross non-performing assets ratio at 0.9 per cent in Q4 has almost trebled in a year.
Developer loans at Rs 40,160 crore account for over 70 per cent of PEL's loan book, while the share of relatively secure home loans is just 9 per cent. Also, Lodha Developers, a stressed firm, adding up to 7 per cent of exposure, and top 10 developers for 31 per cent of the total loan book is disconcerting for investors. Analysts at Citi Research have downgraded FY20 earnings by 8 per cent as they expect growth to slow down.
While PEL is attempting to alleviate the concentration risk by going for joint development and co-investing with private equity firms, the overall slump in the real estate market and liquidity crunch remain major headwinds. The impending stake sale in Shriram Group companies
is another valuation risk. Therefore, unless the real estate sector revives, the outlook for PEL is not too bright.