Piramal, L&T Finance, Tata Capital: Why Nomura sees up to 26% upside in these 3 NBFCs

Nomura has initiated coverage on select NBFCs with a ‘Buy’ rating – Piramal Finance, L&T Finance, and Tata Capital. Meanwhile, it has initiated coverage on HDB Financial Services with a Neutral call. The brokerage house sees as much as 26% upside potential in select stocks. There are several factors that contributed to the coverage, like a favourable outlook on loan growth, room for profit expansion, structural transformations, recovery of loan growth momentum, etc. 

Nomura on NBFC: Key growth drivers 

Nomura expects that at least four NBFCs will deliver high-teens to over 20% loan growth CAGRs over FY26-28. Also, the expectations are of delivering ROE (Return on Equity) expansion to come over mid-teens by FY28. 

NBFCs outpacing bank growth

Nomura expects the gap between the loan growth of banks and NBFCs to widen significantly. They project NBFCs will record a 17% CAGR over FY25–35, compared to just 12% for banks. By FY41, NBFCs are estimated to account for 33% of total system credit, up from 21% in FY25.

“The share of retail loans at 52% is higher for NBFCs vs 40% for banks, as of FY25. Now, if we exclude power sector loans from the NBFC sector (given the dominating presence of PFC and REC here), the share of retail credit in the NBFC sector should be 68-70%, we estimate,” said Nomura.

AI-led transformation and disruption

NBFCs are developing advanced AI engines to disrupt traditional lending processes, such as identifying potential prime customers and increasing efficiency in high-intensity segments like microfinance and personal loans. For example, L&T Finance’s “Cyclops” engine uses alternative data for underwriting, while Piramal Finance has over 45 live AI use-cases across its customer lifecycle.

Strategic “retail-isation”

Many NBFCs are rapidly diversifying their loan books, moving away from wholesale lending (such as infrastructure and real estate) toward high-yielding retail product segments. Giving the example of Piramal Finance, Nomura said that the company has shifted from a wholesale focus to having over 82% of its loan mix in retail.

Also, the brokerage highlighted that NBFCs, most of them, are actively exploring new loan segments to diversify their product portfolios and enhance growth and profitability prospects. 

“We believe loan products that serve the high-income category of the rural segment and mid-income category of the urban segment offer strong potential for transformation/ innovation,” said the report. 

Talent migration from banks

There is a notable “renewed spirit” in the sector, driven by senior management teams moving from major banks to NBFCs. Prominent examples include the MDs and CEOs of Piramal, L&T Finance, and Poonawalla, who joined from banks like Axis Bank, ICICI Bank, and HDFC Bank.

Focus on underpenetrated markets

NBFCs are increasingly targeting underserved and underbanked populations in deeper geographies. For example, HDB Financial Services has over 70% of its branches in Tier-4 cities and beyond, positioning it to capture growth in low-credit-penetration economies.