Latest news with #KrishnaSanghavi
Economic Times
07-07-2025
- Business
- Economic Times
PSU banks trading below book value despite healthy ROE: Krishna Sanghavi
Despite healthy return ratios and minimal asset quality issues, several PSU banks are trading below book value, according to Krishna Sanghavi, CIO-Equity at Mahindra Manulife. This valuation anomaly comes at a time when the fund house is launching a dedicated BFSI sectoral fund, betting on India's demographic dividend and the ongoing financialization of savings in a formal economy. ADVERTISEMENT In this conversation, Sanghavi explains why BFSI offers both cyclical rebound potential in lending and secular growth in non-lending businesses, while discussing how the sector's composition has evolved dramatically—with banks' share of BFSI market cap shrinking from 85% to 57% over two decades, creating opportunities across insurance, AMCs, NBFCs, and capital market intermediaries. Edited excerpts from an interview: What's the core thesis behind launching a sectoral fund focused on BFSI at this market juncture? Are you betting on a cyclical rebound or a structural re-rating? BFSI is a core play on India's demographics, rising per capita income amidst the financialization of savings in a formal economy. Overall, we expect the penetration of different financial products to rise. More Indians are likely to enter higher income strata and can contribute to BFSI sectors' growth either as a saver or borrower (lending), investor (asset management or capital market or life insurance) or seeking protection (life insurance or general insurance). We see it as a combination of cyclical rebound (lending) in line with the economy and secular growth (non-lending businesses). Additionally, there are opportunities for earnings growth and valuations within the various micro-segments in BFSI. Banks, both private and PSUs, have healthy balance sheets and return ratios with minimal asset quality issues. Moreover, the Nifty Financial Services index underperformed the Nifty 500 index in four out of the last five calendar years. Valuations are reasonable and earnings outlook is also improving. The Nifty Financial Services index has already shown signs of revival, outperforming the broader Nifty 500 index by nearly 9.8% in the January to June 25 period. While liquidity has improved, we are yet to see improvement in deposit and credit growth, which could play out as the year progresses, supporting our positive views on the overall BFSI sector. ADVERTISEMENT Expect credit quality to remain good and steady growth to help BFSI maintain broad participation in the profit pool. BFSI is already one-third of India's market cap and profit pool. What's the incremental opportunity you see, and how differentiated can this fund be from existing diversified funds? Within BFSI, companies in sub-sectors such as lending, asset management, and wealth fund will thus be a standalone play on the BFSI theme, compared to our diversified funds where BFSI is only a part of the overall portfolio sectoral continuity of earnings from fund will thus be a standalone play on the BFSI theme compared to our diversified funds, where BFSI is only a part of the overall portfolio sectoral portfolio. ADVERTISEMENT While banking has been the traditional heavyweight, how are you looking at the broader spectrum—insurance, AMCs, fintechs, NBFCs? Which segments excite you the most today? As income levels rise, customers start shifting from savers to either borrowers or investors. This creates wider opportunities for those businesses. When we examine history, in March 2005, Banks constituted nearly 85% of the BFSI market capitalisation, now make up only 57% of the BFSI market capitalisation, while 2—Various from NBFCs and the remaining 20% from segment BFSI financial services companies has continued to rise with their strong earnings growth and news has kept on rising with their strong earnings growth and also newer listings. Each of these financial services segments brings in its own set of opportunities and challenges. Insurance companies have seen healthy growth, driven by rising penetration. Asset managers have seen rapid AUM growth in the last few years, thanks to rising incomes & shift towards investing, partly helped by strong market returns. On the fintech side, there have only been a couple of listings till now and a few others are expected to get listed soon. We believe these segments offer a reasonable growth opportunity. ADVERTISEMENT With valuations in private banks and NBFCs at or below long-term averages, do you see this as a compelling entry point or is it more about selective positioning? Yes, equity portfolio construct would always be about selective positioning based on stock specific criteria like growth, management and valuations. At times this gets impacted due to distortions of ownership or inclusion/exclusion in ETFs. Also, it is part of the investing cycles that at any point, some companies trade at higher or lower than long term average. Overall, we see a healthy environment with a supportive monetary policy on both lower rates as well as higher liquidity and this can help few lenders based on their asset liability mix. How do you perceive the growth opportunity in PSU bank stocks? The PSU banks have gone through a healthy consolidation (mergers), governance reforms & balance sheet improvement. The balance sheet has strengthened with higher capital adequacy, and the narrative on PSU stocks has improved due to diversification into retail lending and recoveries from corporate loans. Operationally, the digital rollout is helping and so is control over total employees. Higher capital would help them grow lending when the corporate capex cycle picks up. From a valuation perspective, quite a few PSU banks are trading below book value despite healthy ROA & ROE in FY25. ADVERTISEMENT Capital market intermediaries have become significant in BFSI's narrative and an investor favourite as well. Do you see them as consistent compounders? Capital market players have a good growth potential as India moves from being a nation of savers to a nation of investors. Rising per capita income as well as younger demography creates new customer segments who are looking at risk-return trade-offs on their investments. One advantage for these businesses is they don't require much capital for growth and hence a good execution led by digital distribution can help them grow sustainably at higher rates. The BFSI universe includes quite a few capital market intermediaries and we expect more investible opportunities from future listings. However, some of these businesses are cyclical and hence a focus on earning sustainability and valuations is a must. In between the two ends of banks and NBFCs, the tilt has largely been in favour of the latter in a rate cut cycle. But given the valuations for both, which one would you be more biased towards? The fact that banks may face margin pressure in a rate cut cycle and NBFCs may benefit is largely known. So, NBFCs have done well in the last year and now valuations for few NBFCs are higher relative to banks. Based on the investment timeframe being short or medium term, the rate cut cycle would start supporting the cost of funds for banks with a time-lag based on their liability franchise, maturity structure and rate cut on savings deposits. The CRR cut and easy liquidity too would help. India's insurance sector remains underpenetrated despite a decade of liberalization. What's the investment case for life vs general insurance at this stage? The outlook for the life insurance segment looks healthy at the moment given these companies faced VNB margin pressure in FY25 due to higher salience of ULIP sales in their mix. The product mix can be more balanced this year, aiding the margin growth. The general insurance segment is seeing slower growth on the motor segment while health insurance segment growth is strong though not very profitable. With the upcoming regulatory norms on expense management, the profitability of the general insurance sector could show improvement as insurers adhere to expense and commission caps. From the investor side, expected IFRS implementation in the next 2 years will help reduce the gap between accounting profits and VNB profits. Another regulatory support is the expected reduction in GST rate that can make insurance products more affordable. So, both Life & General insurance makes a good investment case from a longer term.
Time of India
07-07-2025
- Business
- Time of India
PSU banks trading below book value despite healthy ROE: Krishna Sanghavi
Despite healthy return ratios and minimal asset quality issues, several PSU banks are trading below book value, according to Krishna Sanghavi , CIO-Equity at Mahindra Manulife. This valuation anomaly comes at a time when the fund house is launching a dedicated BFSI sectoral fund, betting on India's demographic dividend and the ongoing financialization of savings in a formal economy. In this conversation, Sanghavi explains why BFSI offers both cyclical rebound potential in lending and secular growth in non-lending businesses, while discussing how the sector's composition has evolved dramatically—with banks' share of BFSI market cap shrinking from 85% to 57% over two decades, creating opportunities across insurance, AMCs, NBFCs, and capital market intermediaries. Edited excerpts from an interview: What's the core thesis behind launching a sectoral fund focused on BFSI at this market juncture? Are you betting on a cyclical rebound or a structural re-rating? BFSI is a core play on India's demographics, rising per capita income amidst the financialization of savings in a formal economy. Overall, we expect the penetration of different financial products to rise. More Indians are likely to enter higher income strata and can contribute to BFSI sectors' growth either as a saver or borrower (lending), investor (asset management or capital market or life insurance) or seeking protection (life insurance or general insurance). We see it as a combination of cyclical rebound (lending) in line with the economy and secular growth (non-lending businesses). Additionally, there are opportunities for earnings growth and valuations within the various micro-segments in BFSI. Banks, both private and PSUs, have healthy balance sheets and return ratios with minimal asset quality issues. Moreover, the Nifty Financial Services index underperformed the Nifty 500 index in four out of the last five calendar years. Valuations are reasonable and earnings outlook is also improving. The Nifty Financial Services index has already shown signs of revival, outperforming the broader Nifty 500 index by nearly 9.8% in the January to June 25 period. While liquidity has improved, we are yet to see improvement in deposit and credit growth, which could play out as the year progresses, supporting our positive views on the overall BFSI sector. Expect credit quality to remain good and steady growth to help BFSI maintain broad participation in the profit pool. BFSI is already one-third of India's market cap and profit pool. What's the incremental opportunity you see, and how differentiated can this fund be from existing diversified funds? Within BFSI, companies in sub-sectors such as lending, asset management, and wealth fund will thus be a standalone play on the BFSI theme, compared to our diversified funds where BFSI is only a part of the overall portfolio sectoral continuity of earnings from fund will thus be a standalone play on the BFSI theme compared to our diversified funds, where BFSI is only a part of the overall portfolio sectoral portfolio. While banking has been the traditional heavyweight, how are you looking at the broader spectrum—insurance, AMCs, fintechs, NBFCs? Which segments excite you the most today? As income levels rise, customers start shifting from savers to either borrowers or investors. This creates wider opportunities for those businesses. When we examine history, in March 2005, Banks constituted nearly 85% of the BFSI market capitalisation, now make up only 57% of the BFSI market capitalisation, while 2—Various from NBFCs and the remaining 20% from segment BFSI financial services companies has continued to rise with their strong earnings growth and news has kept on rising with their strong earnings growth and also newer listings. Each of these financial services segments brings in its own set of opportunities and challenges. Insurance companies have seen healthy growth, driven by rising penetration. Asset managers have seen rapid AUM growth in the last few years, thanks to rising incomes & shift towards investing, partly helped by strong market returns. On the fintech side, there have only been a couple of listings till now and a few others are expected to get listed soon. We believe these segments offer a reasonable growth opportunity. With valuations in private banks and NBFCs at or below long-term averages, do you see this as a compelling entry point or is it more about selective positioning? Yes, equity portfolio construct would always be about selective positioning based on stock specific criteria like growth, management and valuations. At times this gets impacted due to distortions of ownership or inclusion/exclusion in ETFs. Also, it is part of the investing cycles that at any point, some companies trade at higher or lower than long term average. Overall, we see a healthy environment with a supportive monetary policy on both lower rates as well as higher liquidity and this can help few lenders based on their asset liability mix. How do you perceive the growth opportunity in PSU bank stocks? The PSU banks have gone through a healthy consolidation (mergers), governance reforms & balance sheet improvement. The balance sheet has strengthened with higher capital adequacy, and the narrative on PSU stocks has improved due to diversification into retail lending and recoveries from corporate loans. Operationally, the digital rollout is helping and so is control over total employees. Higher capital would help them grow lending when the corporate capex cycle picks up. From a valuation perspective, quite a few PSU banks are trading below book value despite healthy ROA & ROE in FY25. Capital market intermediaries have become significant in BFSI's narrative and an investor favourite as well. Do you see them as consistent compounders? Capital market players have a good growth potential as India moves from being a nation of savers to a nation of investors. Rising per capita income as well as younger demography creates new customer segments who are looking at risk-return trade-offs on their investments. One advantage for these businesses is they don't require much capital for growth and hence a good execution led by digital distribution can help them grow sustainably at higher rates. The BFSI universe includes quite a few capital market intermediaries and we expect more investible opportunities from future listings. However, some of these businesses are cyclical and hence a focus on earning sustainability and valuations is a must. In between the two ends of banks and NBFCs, the tilt has largely been in favour of the latter in a rate cut cycle. But given the valuations for both, which one would you be more biased towards? The fact that banks may face margin pressure in a rate cut cycle and NBFCs may benefit is largely known. So, NBFCs have done well in the last year and now valuations for few NBFCs are higher relative to banks. Based on the investment timeframe being short or medium term, the rate cut cycle would start supporting the cost of funds for banks with a time-lag based on their liability franchise, maturity structure and rate cut on savings deposits. The CRR cut and easy liquidity too would help. India's insurance sector remains underpenetrated despite a decade of liberalization. What's the investment case for life vs general insurance at this stage? The outlook for the life insurance segment looks healthy at the moment given these companies faced VNB margin pressure in FY25 due to higher salience of ULIP sales in their mix. The product mix can be more balanced this year, aiding the margin growth. The general insurance segment is seeing slower growth on the motor segment while health insurance segment growth is strong though not very profitable. With the upcoming regulatory norms on expense management, the profitability of the general insurance sector could show improvement as insurers adhere to expense and commission caps. From the investor side, expected IFRS implementation in the next 2 years will help reduce the gap between accounting profits and VNB profits. Another regulatory support is the expected reduction in GST rate that can make insurance products more affordable. So, both Life & General insurance makes a good investment case from a longer term.
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Business Standard
27-06-2025
- Business
- Business Standard
NFO alert! Mahindra Manulife launches BFSI focused fund; check details here
NFO Alert! Mahindra Manulife Mutual Fund, a joint venture between Mahindra & Mahindra Financial Services (Mahindra Finance) and Manulife Investment Management (Singapore), has announced the launch of the Mahindra Manulife Banking and Financial Services Fund. This open-ended equity scheme aims to provide long-term capital appreciation by investing predominantly in a portfolio of equity and equity-related securities of companies engaged in banking & financial services activities, according to the Scheme Information Document (SID). Mahindra Manulife Banking and Financial Services Fund's Krishna Sanghavi, CIO – equity, Mahindra Manulife Investment Management, said, "The fund aims to build a diversified portfolio that captures the full potential of the BFSI ecosystem from traditional leaders like banks and insurers to emerging players driving innovation in how India saves, borrows, invests, and transacts, with a disciplined focus on fundamentals and valuations.' Banking, he added, remains a strong pillar of India's financial landscape, but the opportunity extends much further. The fund will be managed by Vishal Jajoo and Chetan Sanjay Gindodia. The New Fund Offer (NFO), which opened today, will remain available till July 11, 2025. Mahindra Manulife Banking and Financial Services Fund will reopen for continuous sale and repurchase from July 21, 2025. Mahindra Manulife Banking and Financial Services Fund is offered at ₹10 per unit each during the NFO and continuous offer for units at NAV-based prices. During the NFO, the minimum application amount is ₹1,000 and in multiples of ₹1 thereafter. The minimum amount for switch-in is ₹1,000 and in multiples of ₹0.01 thereafter. The Mahindra Manulife Banking and Financial Services Fund is benchmarked against Nifty Financial Services TRI (First Tier Benchmark). The risk for the NFO as well as the benchmark remains very high, reads the SID. Who should invest in Mahindra Manulife Banking and Financial Services Fund NFO? According to the SID, Mahindra Manulife Banking and Financial Services Fund is suitable for long-term capital appreciation as well as for investment predominantly in a portfolio of equity and equity-related securities of companies engaged in banking & financial services activities. "Investors should consult their financial advisers if in doubt about whether the product is suitable for them," cautioned the SID.
Time of India
04-06-2025
- Business
- Time of India
Result season was better than expected; BFSI beneficiary on multiple fronts: Krishna Sanghavi
Krishna Sanghavi , Chief Investment Officer – Equity, Mahindra Manulife MF , says Indian companies reported better-than-expected earnings. Growth is spread across various sectors. Energy companies saw a combined earnings growth of 7-8%. BFSI and commodity sectors performed well. Divergence exists within sectors, with some companies growing rapidly. BFSI benefits from double-digit nominal GDP growth and strong credit demand. Increased domestic savings are boosting capital markets and related businesses in India. Internal indicators like high frequency data are supporting the India equity market right now. Where is the next big push going to come in from and is it going to be only led by some clarity on tariffs? Krishna Sanghavi: Tariff clarity is something not only India but a lot of global economies and market participants are awaiting. That will clearly help. Maybe it lays down a nice road map for India to further increase its manufacturing capabilities in terms of ability to supply from here to global markets, mainly the US. Let us not forget the US is the largest consumer in the world, and to an extent, any comfort, any small window opening up for Indian players to offer their products to US customers can clearly help. Yes, there might be some challenges on the tariff front. On the reverse side, some Indian industries might have some incremental competition coming up from reduced tariffs, if at all. So tariff is clearly one part and the other part remains how global capital market flows play out especially with FPIs moving money across markets, whether you call it developed markets or emerging markets on one front and within those DMs or EMs, how each country shapes up on valuation/incremental growth curve. So, on the growth part, yes, India is placed nicely with 6.5% GDP growth rate for FY25. It is more likely to be in a similar range for FY26 based on current estimates. A nice double digit nominal growth rate on the back of real GDP shows the economy is broadly intact and all we need is some sort of clarity, maybe a little bit more global. The earning season has just concluded and this time, expectations were quite muted. But we have to understand that the companies have performed a little better versus the muted Street expectations and banking is one of the consensus buys coming in on the Street. Help us with your sectoral calls at this point in time, anything that stood out for you with respect to the earning season as well. Krishna Sanghavi: You are right, the result season was better than expected and the muted expectations clearly help in judging the output as better or maybe worse. For a change, we are having a better results season and the nice part is really well spread across. In fact, if you look at Energy index, there is 7-8% earning growth as a combined basket and profits is broadly spread across BFSI as well as commodity aggregate basket of oil and gas, metal, cement on one side or the resource consumers which is the entire non-BFSI, non-commodity piece, on the other. Live Events You Might Also Like: Sudip Bandyopadhyay flags valuation risks in defence stocks after Mazagon Dock miss One interesting observation from the sectoral mix is that it is quite divergent. Within the same sector, some companies are growing at 15-20% and some are really lagging. So, that is a company or a stock specific earning trajectory always remains relevant in Indian markets because there are a large number of companies to evaluate and the economy is doing what it is doing. So, always find some winners, some people leading the economy and the earning trajectory. Sector-wise, BFSI stands out as a nice beneficiary on multiple fronts. The core hypothesis remains intact as long as we have nominal GDP growth in double digits, the lending piece in place, credit demand in place and lenders also benefit. India is generating far more income and a lot of this income is available for savings. We also have an advantage for capital account convertibility which allows this money to be retained in India for domestic savings, so that helps the capital market piece, maybe the asset management company, the broking businesses, wealth management business because finally, that money comes back to Indian financial markets in whichever shape and form for investment. So, BFSI is some sort of a beneficiary on this sectoral front.
