MUMBAI: India's top hedge fund is exploring opportunities in
state-run banks, a sector shunned by most investors till now, as valuations
turn attractive and the backlog of bad loans that have riddled lenders start to
dwindle.
State-run banks will also benefit if the economy continues to
grow at about 7 percent, Andrew Holland, chief executive of Avendus Capital
Public Markets Alternate Strategies LLP, said at the Reuters Global Investment
2019 Outlook Summit.
Bad loans at Indian banks reached a record $150 billion at
the end of March with state-run banks accounting for the lion's share. But the
bad debt is declining, Indian Finance Minister Arun Jaitley said in September.
"I think we're coming to the end of the cycle in terms
of the bad loans," Holland said, although he added that he would only buy
state-run banks for short periods, because their management remained a concern.
"I still take the view that the management of PSU banks
change too quickly," Holland said. "So, you never really do a good
job over a short period."
"I'll be renting rather than owning them in 2019,"
said Holland, who manages over $900 million in two key funds.
The state-run banking index has dropped nearly 25 percent in
the past 12 months.
Holland said he turned bullish for the first time last month
after being "pretty negative from the global and local perspective"
for most of the year. A correction since September has made valuations
"more compelling", he said.
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