NBFCs shrug off DeMo blues with robust show
The median gross non-performing ratio weakened by 175 basis points to 2.88 per cent.
Despite demonetisation affecting the performance of microfinance (MFIs) and agri-linked players in the second half of the year, the aggregate annual loan growth for the ten listed NBFCs that have released their annual reports so far stood at a healthy 18 per cent, shows data compiled by ETIG.
For another list of nine private sector banks and 12 public sector banks that have released their annual reports so far, the cumulative loan growth in FY17 was 15 per cent and 3.6 per cent, respectively .
As total earnings of the sampled NBFCs jumped more than half, the return ratios also remained stable (median RoA at 1.86 per cent and RoE 17.81 per cent) even as the median gross non-performing ratio weakened by 175 basis points to 2.88 per cent.
The asset quality weakness was predominantly driven by jump in bad asset ratios of Bharat Financial Inclusion (up 590 basis points), Equitas (219 bps), and Shriram Transport Finance (198 bps) while for housing finance players such as Can Fin Homes, Dewan Housing Finance and Gruh Finance the measure remained almost unchanged.
With the aggregate productivity profit per employee -of the sample having expanded by 28 per cent during the year, it is not surprising then that the median remuneration of the key management personnel including CMDs and CFOs stood at 20 per cent during the year, higher than that for some of the private sector banks albeit the remuneration base for the latter remains high. The aggregate productivity measure for the private sector sample declined by 5 per cent in FY17.
Going ahead, as the NBFCs continue to strive for the higher share of credit demand, their superior performance in terms of market returns and valuations they command may sustain.
In the past one year, with an average return of 53 per cent given by the NBFC sample, their median forward price to book multiple currently stands at 3.4 times.
Both private sector bank and public sector bank samples have reported average return of 42 per cent and 14 per cent in the period with their median valuations at 2 times and 0.5 times of the FY18 book value.