Mumbai: Indian finance companies are likely to report strong results for the September-quarter as the economic benefits of a good monsoon offsets concerns of rising interest rates, analysts said.
Four finance companies polled by Reuters may report a 25% jump in quarterly profit, according to a Reuters poll, in line with 22% expected for commercial banks, helped by strong demand for loans.
“Credit off-take is good. The second-quarter (profits) will be robust as their sanctions and disbursements will grow at a rapid pace,” said Deepti Chauhan, analyst at Asit C Mehta Investment Intermediates.
“There are not much concerns on rate hikes as they have passed it on to their clients,” she added.
Net interest income is expected to rise 37%, the poll shows.
Infrastructure lenders, auto financiers and home loan companies are seeing strong demand for their products, aiding higher loan sanctions, offsetting rate hike woes.
Most finance companies polled will be able to maintain net interest margins, despite higher cost of funds as they were able to pass on the rate hike to the clients, analysts said.
“On a year-on-year basis, margin should be good. Most of the institutions has also diversified their funding mix,” said said Clyton Fernandes, analyst at Anand Rathi.
However, any squeeze on liquidity in coming months, could tilt the balance and hurt margins as their cost of funds could rise, unlike banks which have a dedicated source in fixed deposits, analysts said.
Infrastructure & Auto Financiers
Analysts prefer lenders to infrastructure and vehicles as strong growth in auto sales and infrastructure spending by the government will help them.
“Auto sales have been very good. Even used auto sales have grown. So companies like Mahindra Finance and Shriram Transport should post decent numbers,” Chauhan added.
Passenger car sales grew 33.6% and overall commercial vehicles sales posted 41.6% growth for the period during April-September, according to the industry body Society of Indian Automobile Manufacturers (SIAM).
“We believe the infrastructure-focused NBFCs will gain market share from banks in infra-lending as they leverage their IFC status to diversify funding mix and reduce cost of borrowings.
Banks have a limitation on exposure to infrastructure loans and a cap on funding to one single project. “We like infra funding NBFCs, but would prefer bigger players in the market over the smaller ones,” Fernandes added.