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Mumbai: The impact of the second Covid wave would likely be more pronounced, both in terms of business volumes and asset quality, for non-bank lenders as localised lockdowns and loss of lives and livelihoods derailed recovery.
While loan volumes in June quarter (Q1) are expected to be 50-80% of the March 2021 quarter, collection efficiencies witnessed turnaround in June lending some support to already stressed balance sheets. The microfinance sector would be the worst affected from the second Covid wave, say analysts.
Among vehicle finance NBFCs, Cholamandalam and are estimated to perform significantly better than Mahindra Finance, as per YES Securities.
“This space could witness some decline in AUM (assets under management) on a sequential basis due to lower disbursements,” said Hitesh Jain, lead analyst, YES Securities. “Collections also have been relatively resilient for Chola and Shriram as they carried substantial ECL (expected credit loss) buffers.”
As per Motilal Oswal, collection efficiencies for vehicle financiers and microfinance lenders would be around 70-90%. Lack of moratorium could also lead to a spike in restructuring.
“The extent of restructuring will depend upon collection efficiencies in June, percentage of defaulting customers already availing moratorium, and bucket movement (asset quality),” Motilal Oswal Securities said in a note. “The actual picture (recast) will emerge only by the end of the first half of this fiscal year, although we expect a build-up of provisions in the June quarter.”
As per ICICI Securities, HDFC could see loan growth of 12% year on year led by strong real estate sales. Provisions are seen at ₹600 crore after higher provisions in the March quarter. Accordingly, standalone profit is seen flat at ₹3,055 crore on YoY basis. Analysts say they are keenly watching the quantum of recast in the wholesale loan portfolio.
The brokerage house also expects Bajaj Finance to post good growth despite partial lockdowns seen in the June quarter. The non-bank lender has already reported credit growth of 15% YoY and new loan additions at 46 lakh from 54 lakh quarter on quarter.
“Asset quality is expected to report some surge due to lockdowns but strong provisions would keep headline GNPA stable and profit after tax is estimated to rise 46% YoY to ₹1,409 crore,” ICICI Securities said in a note.
Housing finance companies are expected to see a surge in restructuring requests, with analysts pencilling in 2-5% restructuring for affordable housing companies and less than 2% recast of total book for large HFCs.
“While we expect HDFC and LIC Housing Finance to deliver decent retail home loan disbursements, others like PNB Housing may continue to see moderate disbursements due to internal issues,” Motilal Oswal Securities said in a note. “We expect overall disbursements to be supported by better developer participation.”
While loan volumes in June quarter (Q1) are expected to be 50-80% of the March 2021 quarter, collection efficiencies witnessed turnaround in June lending some support to already stressed balance sheets. The microfinance sector would be the worst affected from the second Covid wave, say analysts.
Among vehicle finance NBFCs, Cholamandalam and are estimated to perform significantly better than Mahindra Finance, as per YES Securities.
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Stock score of Shriram Transport Finance Company Ltd moved down by 2 in 6 months on a 10-point scale.
View Latest Stock Report »“This space could witness some decline in AUM (assets under management) on a sequential basis due to lower disbursements,” said Hitesh Jain, lead analyst, YES Securities. “Collections also have been relatively resilient for Chola and Shriram as they carried substantial ECL (expected credit loss) buffers.”
As per Motilal Oswal, collection efficiencies for vehicle financiers and microfinance lenders would be around 70-90%. Lack of moratorium could also lead to a spike in restructuring.
“The extent of restructuring will depend upon collection efficiencies in June, percentage of defaulting customers already availing moratorium, and bucket movement (asset quality),” Motilal Oswal Securities said in a note. “The actual picture (recast) will emerge only by the end of the first half of this fiscal year, although we expect a build-up of provisions in the June quarter.”
As per ICICI Securities, HDFC could see loan growth of 12% year on year led by strong real estate sales. Provisions are seen at ₹600 crore after higher provisions in the March quarter. Accordingly, standalone profit is seen flat at ₹3,055 crore on YoY basis. Analysts say they are keenly watching the quantum of recast in the wholesale loan portfolio.
The brokerage house also expects Bajaj Finance to post good growth despite partial lockdowns seen in the June quarter. The non-bank lender has already reported credit growth of 15% YoY and new loan additions at 46 lakh from 54 lakh quarter on quarter.
“Asset quality is expected to report some surge due to lockdowns but strong provisions would keep headline GNPA stable and profit after tax is estimated to rise 46% YoY to ₹1,409 crore,” ICICI Securities said in a note.
Housing finance companies are expected to see a surge in restructuring requests, with analysts pencilling in 2-5% restructuring for affordable housing companies and less than 2% recast of total book for large HFCs.
“While we expect HDFC and LIC Housing Finance to deliver decent retail home loan disbursements, others like PNB Housing may continue to see moderate disbursements due to internal issues,” Motilal Oswal Securities said in a note. “We expect overall disbursements to be supported by better developer participation.”
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