Is it the right time to invest in consumer financiers?

0
10

The festive season is set to dawn upon us in about a fortnight.

With no pandemic blues souring the sentiment this time, the pent-up demand is set to bring cheers to India Inc.



To that effect, demand for consumer loans is likely to get a big leg up in the coming months.

A Crisil report recently pointed out that non-bank lenders’ asset growth is expected to jump to a four-year high of 11-12% this fiscal.

According to the agency “With NBFCs focusing on higher-yield segments, unsecured loans, which have the second-largest share of 16-20% in the AUM pie, may be the only segment to touch the pre-Covid era growth of 20- 22% this fiscal.”

The growth, therefore, is keeping analysts upbeat about consumer financiers.

Siddharth Purohit, Principal Officer and Fund Manager, InvesQ Investment Advisors says festive season to be without Covid-19-related restrictions for the first time in two years. Balance sheet clean-up has happened; no serious asset quality threat. Lower incremental provisions to boost earnings. Consumer financing companies have healthy pricing power; rising interest rates not a concern.

Analysts say, investors should watch out for any spike in non-performing assets one or two quarters down the line.

Ambareesh Baliga, Independent Market Analyst, says consumer financiers have been doing well. Credit off take has been impressive. There is pain in the lower segment; watch out NPAs levels in the quarters ahead.

At the end of the June quarter of FY23, Bajaj Finance, which is India’s biggest consumer financier, had gross NPA of 1.25% as against 1.6% in Q4FY22

Net NPA, meanwhile, was 0.51%, down from 0.68% sequentially.

For Shriram City Union Finance, GNPA stood at 6.11% in Q1FY23 versus 6.31% in Q4FY22, while NNPA was 3.32% as against 3.30% in Q4FY22.

Yet, analysts believe that consumer behavior isn’t as bad as feared. Therefore, there isn’t any serious concern on the NPA front for now.

From an investment viewpoint, analysts suggest accumulating Bajaj Finance and M&M Financial Services from a long-term perspective.

This, they said, should be done on dips as valuations look expensive at current levels.

On Friday, investors will prepare themselves for the US Fed’s meeting, slated next week. Other global cues and stock-specific news flow will guide the markets.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

.

Source

LEAVE A REPLY

Please enter your comment!
Please enter your name here