Teji Mandi: NBFCs - Greenshoots are appearing but a complete recovery is still miles away

A recent report from Spark India suggests that the NBFC sector is yet to return to pre-Covid levels. However, consolidation is visible across all lending segments.

It also suggests that housing, vehicle finance, textiles & agriculture-related MSMEs, and gold financing are seeing healthy recovery. On the other hand, microfinance, raw material-dependent MSMEs, and discretionary related sectors continue to remain weak. A growing trend of deleveraging has also been observed among the businesses.

Vehicle Finance: CV segment picking up

Among the vehicle finance space, large fleet operators, especially in

Agri/food produce/rural segments are doing well. Their utilization levels have improved. And, they have been able to pass on the increased fuel prices. In the meanwhile, small transporters continue to feel stress due to the financial crunch.

Among the commercial vehicles, light and small CVs continue to witness a healthy business revival. Demand for used commercial vehicles is also robust with an uptick in prices.

Housing Finance: Larger players continue to gain market share

Among the housing space, Larger players continue to gain market share. They are enjoying their dominance over their smaller peers due to the strength of their balance sheets and easy excess to capital.

In the affordable and Tier 2/3 market, real estate demand has slightly moderated since Jan'21. Even in real estate, regional affordable players are losing market share to large brand names as their trust factor is high among the homebuyers.

Microfinance: Improving collection efficiency

The microlenders are seeing a revival in the income level of their borrowers. It is currently at 65%-75% of pre-Covid levels. Improved incomes have resulted in better collection efficiency.

More customers are expected to avail additional credit with income levels improving further. Except for Assam and West Bengal, political interference remains absent from the rest of the country.

Among the other segments, demand for gold finance remains healthy. However, declining gold prices could play a spoilsport in the future.

Many large and private banks are seen making active inroads into this market. However, gold NBFCs have managed to protect their market share so far.

Among MSMEs, beaten down segments like textiles, power looms etc. are witnessing a revival. But, travel, tourism, hospitality, discretionary related sectors continue to remain weak. Raw material dependant businesses are also facing stress. Earlier, they faced Covid related import curbs. Now, they are facing pricing related volatility.

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