Global brokerage Nomura has initiated coverage on four Indian non-banking financial companies (NBFCs), betting on strong retail credit growth and structural expansion in India's lending market. The brokerage has assigned 'Buy' ratings to Piramal Finance, L&T Finance and Tata Capital, while HDB Financial Services has been started with a 'Neutral' rating.
The brokerage expects the companies under coverage to deliver high-teens to over 20% loan growth between FY26 and FY28, driven by increasing penetration of retail lending and opportunities in underbanked segments of the economy. Despite banks dominating India's lending system with roughly 70% share of total credit, NBFCs have steadily expanded their role in recent years.
Stock Calls and Target Prices
Nomura's preferred picks reflect both structural growth potential and improving profitability metrics across diversified NBFCs.
- Piramal Finance - Buy; Target Price: Rs 2,150; CMP: Rs 1,774; Upside: 21%
- L&T Finance - Buy; Target Price: Rs 325; CMP: Rs 272; Upside: 20%
- Tata Capital - Buy; Target Price: Rs 400; CMP: Rs 318; Upside: 26%
- HDB Financial Services - Neutral; Target Price: Rs 760; CMP: Rs 671; Upside: 13%
The brokerage believes the first three lenders offer strong earnings visibility and improving return profiles, while HDB Financial may require a stronger pickup in loan growth for meaningful upside.
NBFCs Positioned for Structural Growth
India remains a low credit-penetration economy, with credit-to-GDP levels significantly below developed markets. This provides a large runway for lenders that can expand access to financing in segments such as vehicle loans, microfinance, gold loans, consumer durable loans and small business lending.
Nomura estimates NBFCs could grow faster than banks over the long term, potentially increasing their share of system credit meaningfully as financial inclusion deepens.
Retail Lending the Key Driver
The brokerage highlights the rapid shift toward retail-focused lending models across NBFCs. Retail loans already form a significant portion of portfolios across many lenders, reducing concentration risks linked to wholesale lending.
For example, Piramal Finance has pivoted sharply toward retail lending after acquiring the assets of Dewan Housing Finance, while L&T Finance has accelerated its transformation into a retail-focused lender with improved asset quality and stable profitability.
Tata Capital, meanwhile, is expected to benefit from product diversification, operational leverage and entry into higher-yield segments, supporting stronger return ratios over the medium term.
Another emerging theme in the sector is the adoption of artificial intelligence in credit assessment. AI tools can analyze alternative data points such as digital payments and online behaviour to expand credit access to new borrowers.
However, Nomura notes that regulatory clarity on AI use in financial services remains a key factor that could shape the pace of adoption across the sector.
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