Mutual Fund

Cash crunch at NBFCs set to curb two-wheeler volumes, says Credit Suisse report

Non-banking financial companies (NBFCs) are likely to *witness severe cash crunch due to the near-term maturity of commercial papers* (CPs) subscribed by mutual funds, affecting sectors reliant on them for funding, especially the two-wheeler segment, warns a report. The *two-wheeler financing has increased* from 30 per cent in FY14 to 50 per cent in FY18, driven mainly by NBFCs. The share of NBFCs, including captives ones, in two-wheeler financing is now at around 60 per cent, according to a report by Credit Suisse. A funding crisis at NBFCs could not have come at a worse time given that the upcoming festive months which account for 25 per cent of two-wheeler sales, notes the report, adding the season accounts for 25-30 per cent of annual volumes for tractors. The Swiss brokerage, therefore, has been *cautious on two-wheeler original equipment makers anticipating* a slowdown in demand in FY20/FY21 on regulatory cost headwinds; tighter funding provides an additional reason, it says.

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