NBFC Q1 Review- Seasonality, Election, Heatwave Impacted Business, Asset Quality; Outlook Positive: Systematix

Systematix Research Report

Non banking financial companies within our coverage universe reported an in-line operational performance, while higher provisions resulted in earnings miss.

The increase in cost of funds has led to net interest margin contraction (in the range of 5-36 basis points QoQ) for most of the companies in our coverage universe, barring Cholamandalam Investment and Finance Company for which NIMs improved by 10 bps sequentially.

In terms of business, assets under management growth remains healthy, though momentum slowed down a bit (27% YoY / 6% QoQ) on account of weak disbursements due to elections, heatwaves and seasonality.

AUM growth traction remained healthy across product categories like SME/consumer segments (33% YoY / 7% QoQ), Vehicle (25% YoY / 5% QoQ), Gold (23% YoY / 10% QoQ) and housing (18% YoY / 3% QoQ).

Asset quality was on a weak footing during the quarter as most of the players saw deterioration (5-30 bps QoQ increase in gross stage-III) in asset quality due to elections, heatwaves and seasonality.

We expect the asset quality to stabilise in coming quarters, and growth momentum to be maintained across most of the product segments. Home First Finance (Buy), Muthoot Finance (Buy) and Shriram Finance (Buy) are our preferred picks within our coverage universe.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.