In my view Avvas Financier’s poor stock performance has been mainly because of high valuations. Until 2 years ago stock used to trade at 6 times book which was clearly excessive given 13-14% ROE of the business. Stock has been in time correction.
Clearly the market is less generous to NBFCs on valuations following RBI’s restrictive policies and higher cost of funds. And none of these small-mid caps NBFCs, Aptus or Avaas, are posting spectacular numbers on your typical parameters such as ROE, NIM, AUM growth etc.
A sane investor will ask as to why they should buy an NBFC at 3-4x book for 14% ROE when they get 16-17% ROE from many dividend paying large private banks current valued at 2 times book.
We’ll have to wait till interest rate cuts and some easing in RBI’s restrictions to see some action in stock prices of these NBFCs.
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