Auto NBFCs Disburse 20.7% More, Diversify Portfolios

India’s auto finance non-banking financial companies (NBFCs) reported a substantial 20.7% year-on-year increase in disbursements during Q1FY27, reaching approximately Rs 1.04 lakh crore. This growth occurred even as commercial vehicle (CV) volumes normalized, leading to a 4.6% quarter-on-quarter decline.

The sector’s assets under management (AUM) expanded by roughly 17% year-on-year. This indicates a strategic shift away from a CV-led surge, with lenders now embracing a more diversified expansion phase to enhance resilience.

Q1FY27 Financial Highlights

Disbursements in Q1FY27 totaled approximately Rs 1.04 lakh crore, marking a 20.7% year-on-year growth. The sector’s Assets Under Management expanded by roughly 17% year-on-year, reflecting robust underlying activity.

Operational profitability also saw significant gains. Pre-provision Operating Profit (PPOP) climbed 35.7% year-on-year to Rs 11,771 crore. Profit After Tax (PAT) surged 53.4% to approximately Rs 6,519 crore, showcasing strong bottom-line performance.

While most major lenders experienced a sequential decline in CV disbursements, Sundaram Finance stood out. The company recorded an 11.1% quarter-on-quarter overall disbursement growth, primarily bolstered by its strong retail franchise.

Strategic Portfolio Diversification Efforts

A significant trend involves lenders actively reducing their reliance on the cyclical nature of vehicle sales. This strategic move aims to smooth earnings and build greater financial stability across their portfolios.

Companies are expanding into various segments including SME/LAP, gold loans, construction equipment financing, personal loans, and home loans. This broadens their revenue streams and reduces concentration risk.

Asset quality across the sector remained stable on an annual basis, despite a seasonal quarter-on-quarter rise in Stage 2 and Stage 3 assets. Management teams across these NBFCs have maintained confident growth guidance for FY27.

This forward-looking perspective targets mid-teen to low-20s AUM growth. The projection is predicated on continued market share gains and the ongoing success of product diversification initiatives, indicating an evolving growth engine beyond traditional auto financing.