Recently, the Reserve Bank of India (RBI) asked NBFCs to make a 0.25% provision on standard assets or performing loans.
Of the 215 NBFCs selected for this study, 54% increased their efficiency during the quarter ended March 2011. Aggregate total income of the 215 NBFCs increased by 34.4% to R14,052 crore during the reporting quarter from R10,456 crore in the quarter ended March 2010. Though their combined net profit increased by 31.5% to R3,400 crore, the return on total income declined by 53 basis points from 24.72% in the quarter ended March 2010 to 24.19% in the quarter ended March 2011.
Among the 215 NBFCs, 89 witnessed a fall in profit after tax (PAT) to total income ratio, while 117 NBFCs showed a higher ratio. Nine showed no change in their ratio.
Housing finance companies posted significant profit growth compared with other lenders on the back of substantial increase in loans and lower non-performing assets. However, their return on total income also showed a decline. HDFC posted a significant decline in the return on total income (30.17% in January-March 2011 versus 31.95%). Others that showed a decline included Dewan Housing (15.41% to 13.49%), Gruh Finance (35.08% to 34.99%) and GIC Housing Finance (22.18% to 18.13%).
Auto lenders Bajaj Finance and Shriram Transport, which cater to the rural and semi-urban areas, have an edge on pricing, unlike banks. Thus, Bajaj Finance showed a significant improvement in return on total income in the quarter ended in March 2011 (18.00% in the March 2011 quarter against 9.80%) and Shriram Transport (21.53% to 24.55%).
Others with significant improvement in the return on income were Sundaram Finance (14.83% to 21.74%), Mukesh Babu Financial Services (12.99% to 36.44%), Magma Fincorp (11.99% to 16.06%) and Sakthi Finance (6.51% to 15.34%).
Those headed the other way included Bajaj Holdings (86.56% to 55.67%), Religare Enterprises (64.37% to 39.71%), SREI Infrastructure Finance (18.80% to 7.50%), Manappuram General Finance and Leasing (27.15% to 24.21%) and GIC Housing Finance (22.18% to 18.13%).
The top five NBFCs in terms of PAT in the three months to March 2011 were HDFC (R1,142 crore), IDFC (R346 crore), Shriram Transport (R341 crore), LIC Housing Finance (R315 crore) and Mahindra & Mahindra Financial Services (R156 crore). For these NBFCs, the PAT to total income ratio ranged between 22% and 30%.