NBFCs Poised for Strong FY27 Growth & RoA Improvement
By Business Desk
Equirus Securities forecasts robust FY27 growth and improved RoA for diversified NBFCs, driven by strong loan expansion in retail segments and resilient asset quality.
Diversified Non-Banking Financial Companies (NBFCs) are poised for robust growth and enhanced return-on-assets (RoA) in FY27. This optimistic forecast comes from a report by Equirus Securities.
Driving Factors for Growth
The report attributes this positive outlook to several key elements. These include strong loan growth, resilient asset quality, and normalizing credit costs.
The first quarter of FY27 already demonstrated broad-based expansion across various retail lending segments. Growth appeared in personal loans, consumer finance, and micro-LAP. Additional areas included housing, gold finance, commercial vehicles, tractors, and rural mobility.
NBFCs strategically focused on higher-yielding retail businesses. They maintained strict underwriting discipline. Notably, gold finance and vehicle financing emerged as particularly significant growth areas.
Projected Financial Performance
Equirus Securities anticipates notable increases in net interest income (NII), pre-provision operating profit (PPoP), and profit after tax (PAT) for its covered entities in FY27. This is supported by substantial assets under management (AUM) growth.
Margin Normalization and Asset Quality
Margins were mixed during Q1FY27 due to higher funding costs. However, sector-wide margin normalization is expected in the second half of FY27.
This normalization, combined with operating leverage and normalizing credit costs, is projected to support further RoA expansion. Asset quality remained broadly resilient.
Stable credit costs were maintained. This was aided by tighter underwriting, improved collections, and portfolio seasoning.
Acknowledging Potential Risks
Despite the positive projections, several potential risks persist for the sector. These include monsoon progression, rural cash flows, and MSME stress. Geopolitical developments and the interest-rate cycle also pose potential challenges.
The strong performance observed in Q1FY27 suggests diversified NBFCs are well-positioned for continued healthy growth. There is potential for credit-cost outperformance and further profitability improvements throughout FY27.