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NBFCs Eye 19% Growth Amid Rising LAP Risks
24 Nov
Summary
- NBFC sector growth projected at 18-19% for current and next fiscal years.
- Loan Against Property (LAP) segment shows strong growth but rising concerns.
- Funding costs for NBFCs are expected to decrease, potentially boosting margins.
The non-banking financial company (NBFC) sector is anticipating substantial growth, with Crisil projecting an 18-19% increase in assets under management (AUM) for the current and next fiscal years. This optimistic forecast is underpinned by supportive government policies, a lower interest rate environment, and strong consumption trends, particularly in secured lending segments like loans against property (LAP).
Piramal Finance has notably outpaced industry growth, achieving a 45% disbursement surge during the recent festive season and projecting a 26% AUM increase. While this strong performance continues, experts like Jairam Sridharan of Piramal Finance and Krishnan Sitaraman of Crisil have raised concerns regarding asset quality. The LAP segment, despite its current strength, is identified as an emerging pocket of concern, with a potential rise in delinquencies.
Funding dynamics reveal a widening gap, with highly-rated NBFCs accessing capital more readily than smaller entities. However, a positive outlook exists for funding costs, which are expected to decrease, potentially leading to margin expansion for NBFCs. This contrasts with banks, which may face margin compression, offering a strategic advantage to well-established NBFCs.
