However, the effect of this may not be fully visible in the margins for the first quarter. The policy rate hikes in response to inflation has jacked up the cost of borrowing for most NBFCs. That brings us to another area that may create fresh challenges for NBFCs. The move to focus on collections instead of growth and proactive provisioning has meant that NBFCs have managed to avoid a surge in delinquencies.
Asset quality was a major trouble area for NBFCs during the pandemic. Indeed, Shriram Transport and Mahindra Finance reported collection efficiency of 98 percent in their respective early updates on Q1FY23. 72 cr: Arihant CapitalĪnother area where NBFCs may put up a strong show besides loan growth is collection efficiencies and asset quality. India’s villages have not yet bounced back from the pandemic’s blow and the sharp increase in inflation has also dented earnings, leaving little room for discretionary expenses or even investment into farming and small businesses.ĬSB Bank Q1 Net Profit seen up 18% YoY to Rs.
Since the company has a high exposure to the rural economy, the uncertainties surrounding farm output may weigh on sentiment here.
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In an early update for Q1FY23, Mahindra Finance reported that its loan book grew by 3 percent sequentially and assets grew by 6 percent. “Even in the case of vehicle financiers, for which Q1 is a seasonally weak quarter, we expect Q1FY23 to be better for the business than Q1s in the prior years,” analysts at Emkay Global Financial Services Ltd wrote in their preview note. A seasonally weak period may, however, weigh on growth somewhat. Vehicle financiers such as Shriram Transport Finance Corporation Ltd, Cholamandalam Investment and Finance Company Ltd and Mahindra & Mahindra Financial Services Ltd may report strong growth in assets under management given the revival in the automobile industry. The segment’s leader, HDFC Ltd may report a loan growth of 15-16 percent, which is its pre-pandemic trend. Kotak points out that those focused on affordable housing such as Aptus Value Housing Finance India Ltd, Aavas Financiers Ltd and Home First Finance Company India Ltd may report loan growth of more than 25-30 percent. Housing finance companies in particular are expected to report balance sheet growth in high double digits for the quarter.
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