NBFC AUM likely to hit Rs 32 trn mark by March 2025; Spandana Sphoorty top pick

economictimes.indiatimes.com:

loans increasing from 15% to 25% in the past decade.

The dynamic regulatory environment poses manageable challenges, and new product offerings are expected to shape the business mix.

While the RBI's directives on unsecured consumer credit may impact capital, the sector remains resilient, with an anticipated 14% growth in the next two years.

NBFC AUM is projected to grow by 16-18% in FY24 and 14-17% in FY25 and cross the INR32t mark by Mar’25.

Unsecured loans are expected to constitute 12-14% of the NBFC AUM, with a growth rate ranging from 14-17%, reflecting a slight moderation due to recent regulatory interventions.

The performance of NBFCs remains robust, characterized by a higher PCR for stage 2 and stage 3, low leverage, and a strategic readiness for broad-based growth.

The NBFC sector is witnessing a notable diversification, with 55% of companies exploring new product segments.

Co-lending partnerships are expected to grow, and NBFCs are actively seeking funding diversification through bonds and securitization.

The retail consumption book is a significant contributor and retail demand in secured and unsecured segments has strengthened, with an increased market share.

Asset quality appears robust and is anticipated to remain fundamentally strong as signs of stress are limited and there are declining trends in Stage 2 loans.

Profitability is expected to remain steady, backed by stable credit costs and operating expense ratios, indicating a positive outlook for the financial performance of NBFCs.

Spandana Sphoorty: LTP Rs 1052| Target Rs 1200
The new management has successfully navigated various disruptions and consequent asset quality stress.

We estimate Spandana to deliver FY26 RoA/RoE of 4.4%/17%, aided