NBFC disbursements picking up, collection efficiency at 70 to 80 pc levels: Motilal Oswal
Sep 09, 2020
Mumbai (Maharashtra) [India], Sep 9 : With improving macros across most business segments, there is increased optimism on collection efficiency as well as on growth across product segments, Motilal Oswal Financial Services said on Wednesday.
Based on interaction with 15 key Indian non-banking finance companies, it concluded that collection efficiency is at 70 to 80 per cent levels and disbursements picking up in the sector.
In retail lending, at least a 15 to 20 per cent improvement was seen in collections over the last two months. Overall collection efficiency was at 70 to 75 per cent for micro loans, at 80 to 90 per cent for vehicle finance and at 85 to 90 per cent for affordable housing across financiers in August.
"All companies have ramped-up their collection infrastructure aggressively and there are talks of the near-normalisation of collection efficiency in most products by Diwali," said Motilal Oswal.
While certain retail lending segments may require restructuring, this will be limited to less than 10 per cent of the portfolio. In wholesale lending, certain real estate exposures, hospitality exposures and toll road projects may require restructuring.
Improving liquidity and a higher risk appetite on account of better collection performance have given companies the confidence to lift disbursements.
Improvement in the rural segment is a consensus view of most participants. Mass and affordable housing have been the key growth drivers for most housing financiers, said Motilal Oswal.
Overall, management commentary was upbeat given the gradual unlocking of the economy, month-on-month improvement in collection efficiency and buoyant rural demand. Besides, adequate liquidity and improving collections have led to higher confidence on growth.
The festive season remains crucial for the growth momentum to continue. With a sharp fall in incremental cost of funds, players are likely to deliver stable to improving margins over the next four quarters, said Motilal Oswal adding that players with a strong parentage, a healthy balance sheet and low asset quality risk are likely to outperform.
