30 Mar 2022 , 12:58 PM
Says Ms. Manushree Saggar, Vice President, Financial Sector Ratings, ICRA Limited, “While 57% of the issuers (by number) are expecting a more than 15% growth in AUM in FY2023, the proportion based on AUM weights is much lower at 11%; indicating that larger players in the segment expect a relatively moderate growth in FY2023. While most of the lenders (69%; in AUM terms) indicated an 10-15% AUM growth, ICRA expects the growth for the overall industry to be about 8-10% for FY2023.”
With the optimism on AUM growth, the NBFCs are also expecting the asset quality related pain to moderate, supported by both business growth as well as recoveries. Overall, 90% of issuers (by AUM) expect reported gross stage 3 (GS3) to reduce by up to 100 basis points (bps) from December 2021 levels (estimated at 4.7%), by end of March 2023. With reference to divergence between reported GS3 and gross non-performing assets (GNPAs) following the clarification by the Reserve Bank of India (RBI), entities expect some divergence to remain. Only 36% (by number) and 19% (by AUM) expect the GS3 and GNPA to be completely aligned. As for the performance of restructured book, most entities (71%, by AUM) expect the restructured book on have similar collection efficiencies as the current loan book.
In terms of liquidity, there is some divergence in the expectation between the larger and small to medium sized entities. 63% of larger entities (with AUM greater than Rs. 50, 000 crore) expect to consume some of the excess liquidity for business growth while smaller ones are looking to maintain liquidity amid expectations of funding constraints, to support their liquidity profile in the event of any uncertainties and, to provide comfort to various stakeholders. At the same time, most of the entities are not expecting capital raise in FY2023, possibly given the current adequate capital positions on the back of low growth in the last two fiscals.
With expectation of reduced credit costs, some moderation in negative carry on balance-sheet liquidity, the entities are expecting the profitability to improve from FY2022 levels. Almost two-thirds of the entities (by AUM weight) are expecting an up to 50 bps increase in return on managed assets (RoMA) in FY2023.
“In ICRA’s view also, profitability for non-bank finance companies is expected to improve to near pre-Covid levels in FY2023; In the current fiscal, profitability would register an improvement over the previous year, on the back of a moderation in the credit cost,” Ms. Saggar concluded.
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