Festive season fails to cheer NBFCs as business growth remains muted

The festive season (August-December) has failed to cheer non-banking finance companies (NBFCs), as growth in business remained muted amid economic slowdown and high interest rates. NBFCs, typically, garner maximum business during the festive season.

Many of the NBFCs went slow in certain segments to control bad loans. These areas include commercial vehicles and construction equipment.

“In the industry, there has been a de-growth. We have grown in tractors and two-wheelers because of strong tie-ups and network,” said Dinanath Dubhashi, managing director and chief executive officer at L&T Finance. In the retail and mid-market finance segments, the company’s disbursements, during the third quarter ended December 2014, were at Rs 4,605 crore, compared with Rs 4,752 crore in the corresponding period of the previous financial year.

Bajaj Finserv, on the other hand, grew in areas like consumer durables. “We have had 37 per cent growth in assets under management (AUM) in the festive season. Our growth has come more from small and medium enterprises and consumer segments. In consumer segment, the growth was mainly due to consumer durables. The two-wheelers sale has been somewhat muted,” said S Sreenivasan, chief financial officer, Bajaj Finserv. According to the firm, AUM in the two-wheelers and three-wheelers finance recorded a de-growth of six per cent in the third quarter on a year-on-year basis, while consumer durable finance recorded a growth of 55 per cent during the same period. Though RBI had cut interest rates and expectations are that more cuts are in store in 2015, loans have not yet become cheaper. Besides, the overall sentiments continue to remain weak.

“We do not see revival going forward. One has to wait and see what happens after the Budget. Even if things were to start changing, one has to wait for the next two quarters before the benefits start,” said Ramesh Iyer, managing director, Mahindra & Mahindra Financial Services. The company posted a 14 per cent decline in consolidated net profit to Rs 157 crore in the quarter ended December 31 due to higher loan provisions and write-offs. On a standalone basis, the value of asset financed by the company declined by eight per cent in the third quarter on a year-on-year basis to Rs 6,710 crore.

Few industry players say the festive season was also muted because Dussehra and Diwali were in the same month, while customers had only one month salary in their hands. Besides, in 2013, most of these NBFCs had witnessed good growth and due to the high base of the previous financial year, this time the growth was not much.