India’s non-banking finance companies are entering a robust phase of recovery, driven by sustained loan growth, improved asset quality, and optimistic earnings upgrades, hinting at a potential new cyclical upswing.
India’s non-banking finance companies are moving into a stronger phase of recovery, with first-quarter FY27 results suggesting gains are widening beyond the usual benefit of lower provisions. According to ETBFSI and The Economic Times, the latest numbers point to healthier loan growth, firmer asset quality, steadier margins and improving operating leverage, all of which are feeding into earnings upgrades sooner than analysts typically expect at this point in the year.
The improvement is notable because it is being driven by several moving parts rather than a single cost-line boost. Lending growth has stayed solid in both secured and unsecured businesses, while credit costs have eased faster than many market watchers had expected. At the same time, funding costs are expected to soften from first-quarter levels, which should help offset some of the pressure from gradually weaker lending yields, according to the reports.
Brokerages are beginning to reflect that shift in their forecasts. ETBFSI reported that earnings estimates for the sector have risen over the past three months, with vehicle finance leading the upgrades. Motilal Oswal Financial Services, cited in the coverage, sees the recovery broadening enough to support a fresh cyclical upswing, and the firm has projected profit growth of about 24 per cent for its NBFC coverage universe in FY27.
Bajaj Finance and L&T Finance stand out as likely beneficiaries of the trend. Bajaj Finance has already shown the benefits of stronger lending momentum and lower provisions in recent results, while L&T Finance is also seen as positioned to gain from the broadening recovery. Even so, analysts caution that the sector is not free of risk, with geopolitical tensions and monsoon-related uncertainty still capable of disturbing credit demand and asset quality.
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