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India's non-banking financial companies (NBFCs) are likely to maintain steady growth in the near to medium term, with management teams retaining their FY27 and medium-term growth guidance as credit demand remains healthy despite geopolitical uncertainties, according to brokerage firm 360 ONE Capital. The brokerage expects asset quality to remain broadly stable, although pressure on lending yields and margins, particularly for gold and affordable housing financiers, will remain key monitorables.
NBFCs under the brokerage's coverage, excluding power financiers, delivered strong earnings in the first quarter of FY27, with net interest income (NII), operating profit and profit after tax (PAT) growing 23.9 per cent, 24.9 per cent and 36.9 per cent year-on-year, respectively. Aggregate assets under management (AUM) grew around 19 per cent YoY, broadly in line with expectations. 360 ONE Capital said management commentary indicated that credit demand has remained resilient, with limited impact so far from the West Asia crisis. Early delinquency indicators also suggest no discernible asset quality stress from the geopolitical situation or El Nino, while stressed assets remained broadly stable across most lending segments. Among vehicle financiers, AUM growth accelerated to 16.8 per cent YoY, compared with 16.4 per cent in the previous quarter, supported by strong disbursement momentum. The brokerage said demand remains 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, partly due to elevated balance transfers out at LIC Housing Finance. LIC Housing Finance subsequently lowered its FY27 loan growth guidance to 8-10 per cent from 10-12 per cent earlier, while other prime HFCs maintained their growth outlook. Gold financiers saw growth moderate to 47.1 per cent YoY, following stabilisation in gold prices and implementation of new gold loan guidelines. The brokerage flagged competitive pressure on yields as a key concern going forward. Power financiers remained the weakest segment, with their combined loan book growing only 2.3 per cent YoY and declining 0.3 per cent sequentially. Margins were broadly in line with expectations, although Muthoot Finance saw sharper-than-expected compression of around 300 basis points. Going ahead, 360 ONE Capital said sustainability of net interest margins will remain a key monitorable amid yield pressures, particularly in gold and affordable housing finance. (ANI)
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