NBFC-retail's AUM likely to grow 5%-7% in FY22, 8%-10% in FY23: Report

The asset under management (AUM) of non-banking financial companies (retail) is expected to grow 5-7 per cent in fiscal 2022 and 8-10 per cent in fiscal 2023, according to a report.

Housing finance companies (HFCs) are likely to see their AUM expanding by 8-10 per cent in the current fiscal and 9-11 per cent in the next financial year, rating agency ICRA Ratings said in a report on Monday.

The agency's Vice-President (Financial Sector Ratings) Manushree Saggar said that within the NBFC-retail segment, personal credit, microfinance and gold loans are likely to be the primary growth drivers as other traditional asset segments-vehicle finance and business credit are still facing headwinds because of supply constraints and asset quality concerns.

The report, however, said NBFC-wholesale AUM will continue to shrink in the current fiscal and stabilise in FY2023.

While the disbursement and AUM trends have revived in Q2 FY2022 and Q3 FY2022, the trend is likely to continue in Q4 of FY2022 as impact of the third wave of the pandemic was limited, it said.

The agency said the disbursement growth will have to remain healthier for a sustained AUM growth.

In line with the trend seen over the past two years, liquidity for the sector has remained adequate, with entities typically maintaining a coverage of their next three-month repayments, the report said.

Also, lower AUM growth in FY2022 warranted limited incremental funding requirement as compared with previously envisaged levels.

"NBFC and HFCs will require Rs 1.8-2.2 lakh crore of incremental fresh funding for meeting its growth requirement in FY2023, assuming entities continue to maintain their liquidity buffers," the report said.

The agency expects the NBFC and HFC return on managed assets (RoMA) to reach near COVID-19 levels of 2.7-2.9 per cent and 1.8-2 per cent in FY2023.

For FY2022, RoMA is estimated to be higher than FY2021 at 2.2-2.4 per cent for NBFC and 1.6-1.8 per cent for HFC, Saggar said.