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Diversified non-banking financial companies (NBFCs) are likely to see upward revisions to their FY27 growth and return-on-assets (RoA) guidance after a strong start to the financial year, with robust loan growth, resilient asset quality and normalising credit costs expected to support performance, according to a report by Equirus Securities.
The brokerage expects its coverage universe to deliver 24.7 per cent growth in net interest income (NII), 29.6 per cent growth in pre-provision operating profit (PPoP) and 37 per cent growth in profit after tax (PAT) in FY27, supported by around 19.4 per cent AUM growth. The report said the performance of diversified NBFCs in the first quarter of FY27 demonstrated broad-based growth despite geopolitical uncertainties, while asset quality remained resilient even during a seasonally weaker quarter. Aggregate assets under management (AAUM) across the sector grew around 19 per cent year-on-year and 4.6 per cent sequentially, reflecting continued expansion across retail lending segments. Lenders have increasingly focused on higher-yielding retail businesses while maintaining underwriting discipline. Growth remained broad-based across personal loans, consumer finance, micro-LAP, housing, gold finance, commercial vehicles, tractors and rural mobility. Gold finance emerged as an important growth area for lenders, while vehicle financing continued to benefit from established franchises in commercial vehicles and rural mobility. The report noted that tighter underwriting and an improvement in customer leverage levels over the fourth quarter of FY25 and the fourth quarter of FY26 are beginning to support diversified lenders. Margins remained mixed during the quarter, with higher funding costs and surplus balance-sheet liquidity partly offsetting the benefit of better lending yields. As the interest-rate cycle evolves, funding-cost transmission and portfolio mix will remain key monitorables. Equirus expects sector-wide margin normalisation in the second half of FY27, which, alongside operating leverage and normalising credit costs, could support further RoA expansion. Asset quality remained broadly resilient. GS2+GS3 levels saw a seasonal uptick across some lenders, while Stage-3 trends improved for most of the sector. Credit costs were broadly stable, supported by tighter underwriting, improved collections and portfolio seasoning. Going ahead, monsoon progression, rural cash flows, MSME stress, geopolitical developments and the interest-rate cycle will remain key risks. However, the strong 1QFY27 performance suggests diversified NBFCs could continue to deliver healthy growth, with scope for credit-cost outperformance and further improvement in profitability during FY27. (ANI)
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