Cholamandalam Finance, PFC, PNB Housing Are UBS' Top Picks Amid Growth Moderation Expectations

UBS Global Research prefers Cholamandalam Financial Holdings Ltd., Power Finance Corp., and PNB Housing Finance in the non-banking financial space. The brokerage is seeing growth moderation and a limited asset quality improvement for companies in this space going forward. However, cost of funds may decline sequentially.

Stock ratings and target prices remained unchanged for companies in this space, UBS Global Research said. The brokerage made slight moderation of 1–2% in earning-per-share estimates for financial years 2025–2027.

Optimism over rate cuts and improvements in asset quality will likely disappoint, while a third variable growth may continue to moderate on year-on-year basis, according to UBS. Asset quality growth remained mixed for NBFCs. Cost of funds, non-convertible debentures yields have risen, and pass-through on MCLR-linked borrowings from banks is still lagging.

UBS expects assets under management growth of 1–6% for diversified NBFCs, while continued moderation will see year-on-year AUM growth. Net interest margins will likely stay stable on the quarter for most names. Commentary on asset quality and growth are the key monitorables in the quarter, it said.

Bajaj Finance will likely lead in AUM growth with 6% sequential rise and 25% on-year growth. Cholamandalam Financial Holdings will follow suit with 5% sequential rise in AUM and 25% on-the-year growth. Its credit cost will rise 1.5%, UBS said.

Shriram Finance Ltd.'s NIM may improve 10-basis-point on the quarter.

Among power financiers, the brokerage estimates 14% on-year growth for power finance companies. REC Ltd. will likely deliver 11% on the year growth. For housing finance companies, UBS expects a 24% on the year growth for Bajaj Housing Finance Ltd.