Housing finance and gold lenders are expected to perform better, while MFIs and commercial vehicle financers face hurdles.
Mumbai: Non-Banking Finance Companies (NBFCs) are likely to post modest growth in earnings for the fourth quarter ended March 31, 2025, as funding challenges, balance sheet risks, and business model realignments continue to weigh. While NBFC housing finance companies and gold lenders are likely to fare better, led by sectoral tailwinds, NBFC-Micro Finance Institutions (MFIs) remain under strain, even as
incremental bad loans have been falling, said analysts. MSME and affordable housing financiers might see certain blips on asset quality in the near future. The RBI has reduced the risk weights for bank loans to NBFCs and MFIs by 25bps to stimulate credit flow.
NBFC focused on commercial vehicle financing also face headwinds, with the segment closing FY25 slightly down YoY despite a pick-up in March.
Infra lenders may see steady credit demand, but overall growth in FY25 may be soft amid slower government spending, likely to rebound next year.
“Our NBFC universe is set for a weak Q4FY25, likely marking a second quarter of subdued performance. Expect Q4E earnings growth to be modest (a 5 per cent YoY uptick) due to measured expansion (15.8 per cent asset under management growth), elevated credit costs and operating cost strain. While credit costs should peak out sooner, it is a tad premature to assert that the worst is behind us. Q4 will remain elevated on credit costs,” said Shweta Daptardar, analyst at Elara Securities in a report.
“Diversified NBFCs and those focused on housing and consumer finance are better poised, aided by tax incentives and rate cuts. The Q4FY25 standouts include CreditAccess Grameen (+11.5 per cent QoQ), bouncing back from a weak Q3, Power Finance Corporation (+7 per cent QoQ), and SBI Cards and Payments (+6.4 per cent QoQ),” added Daptardar.
