Bullish on SKS Micro and M&M Financial in NBFS space: Mehraboon Irani

In a chat with ET Now, Mehraboon Irani, Nirmal Bang Securities, shares his views on NBFC space. Excerpts:

ET Now: Your call on NBFCs which have had a decent run?

Mehraboon Irani: Budget is going to have a clear thrust on railways which will happen in the Railway Budget. Defence could be the second best sector. Third sector could be the NBFCs mainly because of the smart cities concept wherein NBFCs will have to play a role.

Now if you look at NBFC, railways, defence and to some extent infrastructure, most of the stocks have already run up very sharply on expectations. Should we buy into them? If they are quality companies, answer is yes but if they are companies whose balance sheets are in a very bad shape which applies to 95% of the infrastructure stock companies listed, the answer would be no because most of them look very expensive to me and I do not think these are going to translate into the balance sheet and the P&L account of these companies at least for the next couple of years.

The story is great even for defence companies. Stocks have gone up very sharply. Coming to what you asked me about NBFCs, there are couple of decent names over there and especially one or two of them which have still not gone up too much, names like SKS Micro which I do not know whether I should call it proper NBFC, Shriram Transport, M&M Financial according to me all decent names in their own way. SKS has done a lot homework and has come back into what it was supposed to be once upon a time. But market is getting a little bit sceptical about M&M Financial. It can be the underdog which can end up giving the best returns over the next six to nine months in the NBFC space.

The point is the numbers need to improve in some way or the other and all this is a corollary to the fact that we will see ultimately the economy showing an improvement. If that assumption goes wrong, which I am quite confident will not, the guesses which you are making right now will correct on that.