NBFCs FY27 Growth: Strong Outlook for Diversified Lenders

Diversified non-banking financial companies (NBFCs) are set for stronger growth and improved return-on-assets (RoA) in FY27, according to a recent report by Equirus Securities. This optimistic outlook stems from robust loan expansion, resilient asset quality, and normalizing credit costs within the sector.

Key Growth Projections for FY27

The brokerage anticipates significant financial advancements for its coverage universe in the upcoming fiscal year. These projections highlight a period of substantial expansion across key performance indicators.

• Net interest income (NII) is expected to grow by 24.7%.
• Pre-provision operating profit (PPoP) is forecasted to increase by 29.6%.
• Profit after tax (PAT) is projected to see a substantial rise of 37%.
• Aggregate assets under management (AUM) are estimated to expand by around 19.4%.

Q1 Momentum and Strategic Focus

The first quarter of FY27 already demonstrated broad-based growth, with aggregate assets under management (AAUM) increasing approximately 19% year-on-year and 4.6% sequentially. Lenders have strategically shifted their focus towards higher-yielding retail businesses.

• Personal loans
• Consumer finance
• Micro-LAP
• Housing
• Gold finance
• Commercial vehicles
• Tractors
• Rural mobility

Notably, gold finance emerged as a significant growth area, reflecting a disciplined approach to underwriting across these segments.

Margin and Asset Quality Outlook

Margins in Q1 were mixed, influenced by higher funding costs and surplus balance-sheet liquidity. However, sector-wide margin normalization is anticipated in the second half of FY27, which, combined with operating leverage and normalizing credit costs, could further support RoA expansion.

Asset quality has remained broadly resilient, with stable credit costs attributed to tighter underwriting practices, improved collections, and portfolio seasoning. This stability provides a solid foundation for future profitability.

Navigating Potential Headwinds

While the outlook is positive, several potential risks could influence the trajectory of NBFCs. These factors warrant close monitoring by stakeholders.

• Monsoon progression
• Rural cash flows
• MSME stress
• Geopolitical developments
• The interest-rate cycle

Despite these potential challenges, the strong performance in Q1 FY27 suggests diversified NBFCs are well-positioned for continued healthy growth and improved profitability, with scope for credit-cost outperformance during the fiscal year.