By Kshipra Petkar
The earnings of Indian non-banking financial companies are expected to be muted for the quarter ended June, due to fall in disbursements and asset quality pressures, analysts said.
“Our outlook remains positive backed by improving margin trajectory and healthy credit cost environment; slowdown in growth, however, is a dampener,” Prabhudas Lilladher said in its report.
Analysts expect the diversified non-bank lenders to perform better in comparison to vehicle finance and microfinance players. Growth for housing finance NBFCs is expected to pick up.
“Affordable housing is likely to emerge better than peers due to minimal overlap with MFI customers and limited exposure to s-LAP segment,” ICICI Securities said in its pre-earnings report.
Analysts also expect that the 100-basis points rate cut by the Reserve Bank of India since February to drive a small moderation in cost of borrowings in April-June, while the full impact on net interest margins will start reflecting in the second half of the current financial. Net interest income will continue on the back of strong AUM growth and benefits from recent repo rate cut by the RBI.
“SHFL (Shriram Finance) expects around 20bps reduction in CoF (cost of funds) in FY26, while CIFC (Cholamandalam Investment and Finance Co) expects ~15bps reduction as ~20% of its borrowings are linked to the repo rate/ T-Bills,” Prabhudas Lilladher said in its report.
In the previous quarter, the management commentary for auto financiers suggested a moderation in cost of funds, and Prabhudas Lilladher expects the trend to continue in the quarter ended June, which would result in an improvement in margins. “For Bajaj Finance, given the lower interest rate environment, we build in an improvement in CoF by ~15bps in FY26,” the report said.
Analysts also expect the operating expenditure to remain elevated as players invest in digital transformation and new business verticals.
Even though the stress in unsecured personal loans and microloans was seen stabilising, which is positive, vehicles and secured micro, small and medium enterprises continue to see moderate weakness, analysts said.
The improving trend in collection which was sustained during Jan-Mar, barring Karnataka, derailed in Apr-Jun, reports said.
ICICI Securities in its pre-earnings report said, “The trend derailed during Q1FY26 (Apr-Jun)– a few (NBFCs) are highlighting seasonality while few mention the impact due to credit crunch post implementation of guardrail 2.0 (maximum 3 lenders per borrower). Hence, credit behaviour of borrowers with >3 lenders post guardrail 2.0 would be the key thing to watch out for Q1FY26.” It also said that the movement in early bucket delinquencies would be key thing to watch out for in the quarter ended June.
