INSUBCONTINENT EXCLUSIVE:
Mumbai: Bajaj Finance, Shriram Transport Finance and Mahindra Finance are expected to lead over 30% earnings growth for the non-banking
financial companies in the June quarter on high retail loan growth, buoyed by a pick up in rural demand.
These companies, however, are
likely to report higher loan losses, according to the Indian Accounting Standards Ind-AS that have been converged with International
Financial Reporting Standards.
Unlike banks, NBFCs will adopt Ind-AS in the first quarter leading to higher loan loss provisioning
requirement and volatile earnings.
NBFCs with rural focus are expected to report better earnings with improvement in market conditions and
strong commercial vehicle sales, among whom Mahindra Finance and Shriram Transport Finance are expected to benefit
However, housing finance companies are expected to report lower margins due to higher interest rates with steady loan growth.
Under Ind-AS,
housing finance companies and NBFCs will have to provide for expected 12-month credit loss for assets in 0-30 days past dues (dpd) bucket,
for assets in 30-90 dpd bucket and over 90 dpd bucket
This compares with 40 bps standard asset provisioning in 0-90 dpd bucket and NPA provisioning as per regulatory norms for 90-dpd
Motilal Oswal in a report.
NBFCs had written to the Reserve Bank of India to defer the accounting policies based on Ind-AS in line with the
while rural collections have been good, as per our feedback
Gross NPA should be broadly stable for Shriram Transport Finance, while that at Mahindra Finance, could edge up slightly in line with usual
strong loan growth.
Morgan Stanley expects Bajaj Finance to report 40% growth in revenue and assets under management
The impact of Ind-AS reporting will be the subvention income it will need to amortise over the life of the contracts as against being
accounted on receipt basis currently, said the report.
Housing finance companies are expected to report 18-20% growth in individual loan
growth and a similar growth in developer loan segment.
LIC Housing Finance is expected to report muted growth in profit while disbursements
are expected to be stronger.
