NBFCs Q2 results preview: For non-banking financial companies (NBFCs), an Asset Under Management (AUM) growth of approximately 17% year-on-year is anticipated in the second quarter of FY26 (compared to ~17%/20% year-on-year in the first quarter of FY26 and second quarter of FY25), along with a slight improvement in Return on Equity (RoEs) expected to reach 13.6% in 2QFY26E (up from 13.1% in 1QFY26), said JM Financial Research in its preview report for Q2 results covering a universe of 23 NBFCs.
Disbursement growth is anticipated to accelerate across all segments, driven primarily by the upcoming festive season for auto lenders, expansion into non-MFI sectors for MFIs (Micro finance Institutions), a rise in gold prices for gold financers, and a rebound in housing activity following a typically weaker first quarter.
Generally, profit margins are projected to either improve or remain stable for most, attributed to a reduction in cost of funds. While numerous players have adjusted their credit cost forecasts upward, the brokerage does not foresee a significant improvement in credit costs during the second quarter.
The brokerage’s favoured choices among NBFCs include: Bajaj Finance and Aditya Birla Capital (in diversified NBFCs), Shriram Housing Finance (in vehicle finance), Aadhar Housing Finance and AAVAS Financiers (in affordable housing finance companies), and Fedbank Financial Services (in micro, small, and medium enterprises/gold).
Diversified NBFCs
The brokerage predicts that year-over-year growth in assets under management (AUM) for diversified financiers will be lower in the second quarter of FY26 due to lackluster disbursements in the previous two quarters. Nevertheless, overall margins are anticipated to improve thanks to benefits from the cost of funds, which will arise from new disbursals at lower interest rates.
For most companies, credit costs are expected to remain stable quarter-over-quarter. Bajaj Finance is the brokerage’s top recommendation in this sector, followed by Aditya Birla Capital.
Housing financiers
According to the brokerage, growth in disbursements is anticipated to accelerate, primarily led by PNB HF (with a disbursement growth of 22% YoY in the second quarter) and Aavas (showing a disbursement growth of 24% YoY in the same period). Margins are expected to stay within a stable range since home loans are predominantly issued at floating rates.
The credit cost is projected to remain low across the various companies, with PNB HF likely to report a negative credit cost due to recoveries. The brokerage’s favoured selections in this sector are Aadhar Housing and Aavas Financiers.
Vehicle financiers
The slowdown in AUM growth for vehicle financiers such as Shriram Housing Finance, Cholamandalam Investment and Finance Company, and Mahindra & Mahindra Financial Services is expected to persist, influenced by lower disbursement growth in recent quarters, according to the brokerage house.
Nevertheless, the second half of the year is anticipated to be robust due to increased demand and volume driven by GST cuts. Mahindra & Mahindra Financial Services reported approximately 5.4% quarter-over-quarter growth in disbursements. For Cholamandalam Investment, the brokerage foresees a gradual recovery in disbursement growth, resulting in around 6.5% QoQ growth.
Cholamandalam Investment and Shriram Housing are expected to see a rise in credit costs quarter-over-quarter from their non-VF book. Mahindra & Mahindra Financial Services also noted an increase in GS3 by 10-20 basis points, which should contribute to a rise in its credit costs.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
