India’s non-banking financial companies (NBFCs) are likely to maintain steady growth in the near to medium term, with credit demand remaining healthy despite geopolitical uncertainties, according to brokerage firm 360 ONE Capital.The brokerage said management teams have retained their FY27 and medium-term growth guidance, while asset quality is expected to remain broadly stable.However, pressure on lending yields and margins, particularly for gold and affordable housing financiers, will remain key monitorables.
NBFC earnings show strong growth in Q1 FY27
NBFCs under 360 ONE Capital’s coverage, excluding power financiers, reported strong earnings in the first quarter of FY27.Net interest income (NII) grew 23.9 per cent year-on-year, while operating profit increased 24.9 per cent and profit after tax (PAT) rose 36.9 per cent. Aggregate assets under management (AUM) grew around 19 per cent YoY, broadly in line with expectations.The brokerage said management commentary indicated that credit demand remained resilient, with the West Asia crisis having a limited impact so far.Early delinquency indicators also showed no discernible asset quality stress from the geopolitical situation or El Nino, while stressed assets remained broadly stable across most lending segments.
Vehicle financiers see stronger AUM growth
Among vehicle financiers, AUM growth accelerated to 16.8 per cent YoY from 16.4 per cent in the previous quarter.The brokerage attributed the improvement to strong disbursement momentum and said demand remained healthy, with limited impact from monsoons and geopolitical uncertainties.Housing finance companies (HFCs), however, recorded slower-than-expected AUM growth of 5.6 per cent YoY.The weaker growth was partly attributed to elevated balance transfers out at LIC Housing Finance. The company subsequently lowered its FY27 loan growth guidance to 8-10 per cent, from 10-12 per cent earlier.Other prime HFCs maintained their growth outlook, according to 360 ONE Capital.
Gold finance growth moderates, power financiers remain weak
Growth among gold financiers moderated to 47.1 per cent YoY, following stabilisation in gold prices and the implementation of new gold loan guidelines.The brokerage flagged competitive pressure on yields as a key concern for the segment going forward.Power financiers remained the weakest segment covered by the brokerage. Their combined loan book grew only 2.3 per cent YoY and declined 0.3 per cent sequentially.Margins were broadly in line with expectations, although Muthoot Finance recorded a sharper-than-expected compression of around 300 basis points.Going forward, 360 ONE Capital said the sustainability of net interest margins will remain a key monitorable amid yield pressures, particularly in gold finance and affordable housing finance.
