NBFC Q4 Preview: NIM To Vary But Growth Momentum To Sustain

Citi expects the AUM growth to be sustained for the non-banking financial companies and housing finance companies.

<div class="paragraphs"><p>Indian rupee notes. (Photo: Vijay Sartape/NDTV Profit)</p></div>
Indian rupee notes. (Photo: Vijay Sartape/NDTV Profit)

The net interest margins will vary across non-banking players, while robust growth in the assets under management will continue, according to Citi Research.

Eyes are on the growth trajectory of non-bank lenders, given the heightened regulatory actions. Bajaj Finance Ltd., L&T Finance Ltd., Cholamandalam Investment and Finance Co. and Shriram Finance Ltd. will likely have robust earnings growth, the brokerage said in a report on April 2.

The NIM trend will be divergent, depending on the borrowing profile and focus on high-yielding portfolio mix. Easing liquidity aided market-borrowing rates in the fourth quarter, while bank borrowings have become expensive, Citi said.

Citi expects the AUM growth to be sustained for the non-banking financial companies and housing finance companies, except for LIC Housing Finance Ltd., L&T Finance and Piramal Enterprises Ltd.

The NBFCs will face increased cost pressure on its borrowings as banks have passed on the impact of increased risk weights and MCLR-linked borrowings will get repriced with a six–12-month lag. However, wholesale borrowing rates have eased with improved liquidity, giving benefit on refinancing of its bond borrowings, according to Citi.

Things To Watch Out For In NBFC Companies 

Bajaj Finance

  • AUM growth above 30% year-on-year.

  • Commentary around regulatory sanctions.

  • Remedial measures on a couple of products.

  • Credit in urban business-to-consumer model will be closely tracked.

Cholamandalam Investment

  • The key will be the sustenance of over 5% growth quarter-on-quarter.

  • The AUM growth and NIM trajectory, while credit cost is anticipated to seasonally improve.

Shriram Finance

  • Personal vehicles, micro, small and medium enterprises and synergy from the rollout of Shriram City Union Finance Ltd.'s products from e-Shriram Transport Finance branches should support a growth momentum of over 20%.

  • The NIM and credit-cost trajectory is expected to be stable.

L&T Finance

  • Sustained traction in two-wheeler, microfinance lending, and retail housing can support flat to marginally better disbursement growth.

  • Overlay provisions will be in focus as unsecured lending leads to elevated credit cost.

Piramal Enterprises

  • Earnings likely will be volatile due to the in Shriram Investment Holdings Pvt.'s stake-sale gain of Rs 8.7 billion and regular recovery from the alternative-investment-fund hit already taken.

  • Clarity is required on the write-back of the AIF losses and setoff of favourable tax order.

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