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South NBFCs' Loan Growth Outpaces Banks
29 Aug
Summary
- South-based NBFCs achieved double-digit loan growth during a slow credit period.
- High-margin loans in commercial vehicles, used cars, SME, and gold drive performance.
- NBFCs benefit from regulatory advantages over banks regarding priority sector lending.
Three leading south-based Non-Banking Financial Companies (NBFCs) are experiencing a 'war' for market share in high-margin loan segments. These include commercial vehicles, used cars, Small and Medium Enterprises (SME), and gold loans. This growth is notable, occurring even during the June quarter, traditionally a slack period for credit. NBFCs possess a regulatory advantage over banks, as they are not bound by the Reserve Bank of India's (RBI) priority sector lending rules. This allows them to focus on profitable lending areas and maintain stronger net interest margins (NIMs).
Sundaram Finance, based in Chennai, saw its assets under management grow by 17% year-on-year to Rs 62,275 crore, with a 21.7% rise in standalone net profit to Rs 521.6 crore. Shriram Finance also reported strong growth, with its loan book expanding by 15.3% to Rs 3.13 lakh crore and its net profit surging by 59.8% to Rs 3,444.6 crore, aided by a NIM of 9.04% and significant growth in commercial vehicle and gold loans.
Cholamandalam Investment & Finance Company experienced a 22% year-on-year growth in its assets under management to Rs 2.33 lakh crore. It maintained an 8.2% NIM and saw its standalone net profit increase by 45.6% to Rs 1,653.6 crore. Despite higher non-performing assets (NPAs) compared to peers, its strong loan growth and margins contributed to this profit rise. Investors are showing keen interest, with these NBFCs trading at high valuations, reflecting their robust operational performance and growth potential.
