Diversified non-banking financial companies are entering FY27 with robust momentum, driven by strong loan demand and steady asset quality, prompting analysts to potentially upgrade growth and return-on-assets guidance for the sector.
Diversified non-banking financial companies are entering FY27 with momentum that could force analysts to raise growth and return-on-assets guidance, according to Equirus Securities. The brokerage said strong loan demand, steadier asset quality and easing credit costs are setting up a better earnings profile after a robust start to the financial year.
Equirus expects the companies it covers to post 24.7% growth in net interest income, 29.6% growth in pre-provision operating profit and 37% growth in profit after tax in FY27, backed by about 19.4% growth in assets under management. It said the first quarter showed broad-based expansion despite geopolitical uncertainty, with asset quality holding up even in a seasonally weaker period.
The report said aggregate assets under management across the sector rose about 19% from a year earlier and 4.6% from the previous quarter, helped by continued growth in retail lending. Lenders have kept focusing on higher-yielding consumer businesses while staying disciplined on underwriting, with growth spread across personal loans, consumer finance, micro-LAP, housing, gold finance, commercial vehicles, tractors and rural mobility. Gold finance has emerged as a major engine of expansion, while vehicle financiers continue to draw support from established commercial vehicle and rural franchises.
Margins were mixed in the quarter, with higher funding costs and excess balance-sheet liquidity offsetting part of the benefit from stronger lending yields. Equirus said margin normalisation in the second half of FY27 could coincide with operating leverage and stabilising credit costs, lifting profitability further. It added that asset quality remained broadly resilient, with some lenders seeing a seasonal rise in GS2 and GS3 assets while most reported improvements in Stage 3 trends.
Other market reports point in the same direction. The Economic Times and Financial Express both said diversified NBFCs are likely to sustain strong loan growth in FY27, supported by MSME lending, vehicle finance, rural credit and gold loans. Business Standard, however, said near-term risks remain around rural-linked portfolios, small-ticket loans against property and microfinance exposure in parts of West Bengal and Gujarat, even as the Reserve Bank of India’s revised upper-layer framework gives larger lenders more regulatory clarity.
For now, the sector’s first-quarter performance suggests the upcycle is still intact. But monsoon progress, rural cash flows, stress in MSME borrowers, geopolitical tensions and the path of interest rates will decide how far that strength carries into the rest of FY27.
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