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Motilal Oswal Report
We expect our coverage universe of non banking financial company – lending financials to deliver 19%/20%/ 29% YoY growth in net interest income/pre-provision operating profit/profit after tax in Q1 FY24.
In sharp contrast to the otherwise weaker trends in the first quarter of any typical fiscal year, we anticipate the disbursement momentum to remain buoyant and asset quality to remain largely stable in Q1 FY24. The strong new business volumes were underpinned by a healthy underlying demand for vehicle finance, mortgages, personal loans, business loans and even gold loans.
The adverse impact of high interest rates on prime mortgage demand has now waned with expectations of stability in interest rates. Affordable housing financiers and vehicle financiers continue to deliver strong assets under management growth.
Gold loan NBFCs have witnessed a systemic growth in gold loan demand aided by elevated gold prices and reduced aggression from banks. We expect gold financiers to report a QoQ gold loan growth of ~4-5%.
For Manappuram Finance Ltd. in particular, we anticipate a sequential growth of 3-4% in the gold loan book without any compromise on yields/margins. We estimate ~17% YoY/~5.5% QoQ loan growth for our coverage universe in Q1 FY24.
Vehicle financiers will continue to report net interest margin compression in Q1 FY24 because of liability re-pricing and the consequent increase in the cost of fund. However, we expect vehicle financiers to deliver NIM expansion in H2 FY24 (versus H1) in a stable to a declining interest rate environment anticipated over the next nine-12 months.
We forecast margins for Shriram Finance Ltd. and Mahindra and Mahindra Financial Services Ltd. to sequentially decline by ~10 basis point while we project Cholamandalam Investment and Finance Company Ltd. to report broadly stable NIMs.
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