Best NBFC Stocks in India 2024

Best NBFC stocks in India: A non-bank financial institution, or NBFC for short, is a company that acts almost like a bank. Not only can they lend freely to the public, but they can also borrow on financial markets. However, when it comes to borrowing, banks can accept deposits from the public while NBFCs cannot.

NBFCs tend to be smaller than banks, but may have specific niches, such as specific sectors to which they lend. Because of this specific focus and specialization, they take on slightly more risk than banks, which demand a higher return on risk.

Best NBFC stocks in India

This is a brief explanation of what an NBFC is. In this article on the best NBFC stocks in India, we take a look at some of the lending giants, their statistics, and the size of their business.

Best NBFC Stocks in India #1 – Bajaj Finance

Bajaj Finance is one of the most diversified financial services companies in India with a market capitalization of over Rs. 4.5 Lakh Chrome Company has a huge presence in India with over 3,733 branches serving over 6.9 million customers.

Bajaj Finance is a subsidiary of parent company Bajaj Finserve, which owns 52.49% stake in the company. Bajaj Finance is the parent company of Bajaj Housing Finance & Bajaj Financial Securities Ltd, which are wholly-owned subsidiaries of Bajaj Finance.

Additionally, Snapwork Technologies Pvt Ltd, which provides software products to Bajaj Finance, is an affiliate of Bajaj Finance. During the year, Bajaj Finance successfully added over 11.6 billion new customers. Technology platforms have enabled 3.5 billion people to use digital app platforms.

The company offers a variety of credit products and services such as consumer loans, personal loans, securities loans, small business loans, commercial loans and various other services.

Bajaj Finance increased its loan book to over 2.96 Cr accounts, an increase of 20% over the previous year. The company currently has approximately Rs. Assets under management (AUM) worth 2.47 Lakh Cr, up 29% from the previous year.

Net interest income of NBFCs increased from Rs. 21,892 Cr to Rs. 28,846 Cr in FY23, a growth of over 32% and no impact on net interest margin, according to company filings. Net profit saw an aggressive jump of 64% from Rs. 7028 Cr in FY22 to Rs. 11,508 Cr in FY23. This was possible because, compared to the exponential increase in sales, the increase in costs was only 17%.

Best NBFC Stocks in India #2 – Cholamandalam Investments & Finance

Cholamandalam Investment and Finance Company Limited (also known as Chola) was established in 1978 as the financial services arm of the Murugappa Group. Chola started out as an equipment finance company but has now transformed into a full-service financial services provider.

The NBFC operates 1204 branches across India with Rs. 1.12 Lakh Cr worth of assets under management (AUM), up 36% from Rs. 82,904 Cr in FY22. At the same time, the company aggressively increased its spending by 87% from Rs. 35.490 in FY22 to Rs. For FY23, it is 66,532.

We provide auto finance, home loans, real estate loans, small business loans, secured business personal loans (SBPL), consumer and small business loans (CSEL) and various other financial services to our customers.

In addition to its lending business, the company operates a used car market specializing in commercial vehicles. gadi bazaar. The platform has 7000+ sellers, 9000+ bidders, and 600,000+ listings on the platform. The platform is also optimized for cross-selling vehicle loans to individuals looking to purchase a vehicle.

Chola’s vehicle finance business is its largest segment with assets worth Rs. The management accounts for about 63% of the company’s total assets at 66,938Cr. This is followed by real estate loans comprising 20% ​​of the company’s total assets. The sector grew by 29%. The home loan segment ranks third.^rd The largest segment with assets worth Rs. 8451 Cr is under management.

Net interest income of NBFCs increased from Rs. 5840 Cr in FY22 to Rs. 7229 Cr in FY23, an increase of 23.8%. Operating profit also increased by 24% to 50 billion won. 2159 Cr in FY22 to Rs. 2,677 Cr in FY 2023.

Best NBFC Stock in India #3 – IRFC

Indian Railway Finance Corporation is not a traditional NBFC as it was established in 1986 for a single purpose. IRFC is the dedicated financial arm of Indian Railways for mobilizing funds from domestic and foreign capital markets.

The company is a public sector undertaking under the Ministry of Railways. of India. The main objective of IRFC is to meet the ‘Extra Budgetary Resources’ (EBR) requirements of Indian Railways by borrowing from the market at competitive prices.

The funds required to finance asset acquisition/creation are borrowed and then leased to Indian Railways. As of FY23, IRFC’s cumulative funding for the railway sector crossed Rs. 5.04 lakh Cr. These funds will be used to acquire rolling stock assets (trains) and build rail infrastructure.

So far, IRFC has supported 13,764 locomotives, 76,735 coaches and 2,65,815 wagons, which accounts for about 75% of the total fleet of Indian Railways. From 2011 to 2012, IRFC worked on financing and building capacity for rail projects.

IRFC has also provided loans to various entities in the railway sector such as Rail Vikas Nigam Limited (RVNL), Railtel, Konkan Railway Corporation Limited (KRCL), Pipavav Railway Corporation Limited (PRCL), etc.

IRFC earned 68% of its revenue from rental income amounting to Rs. 16,344 Cr. It earned interest income of around 7547 Cr and contributed to 32% of the revenue. The company’s profitability increased marginally by 4% from Rs. 6089Cr in FY22 is Rs. 6337 Cr in FY23.

Best NBFC Stocks in India #4 – Shriram Finance

Shriram Finance was founded in 1979 by R. Thyagarajan, AVS Raja and T. Jayaraman. This non-banking finance company (NBFC) primarily provides lease-purchase finance for trucks, cars and other commercial vehicles.

The company also finances construction equipment, farm equipment, small business, gold loans, personal loans and working capital loans.

All three entities Shriram City Union Finance Limited (SCUF), Shriram Capital Limited (SCL) and Shriram Transport Finance Company Limited (STFC) were merged to form Shriram Finance Ltd.

Currently, the company has 1.85 million chrome worth of assets under management and is one of the largest retail NBFCs in India with an individual customer base of 73.24 million. It operates approximately 2,922 branches across the country and has 64,052 employees.

Due to the above-mentioned merger, interest income of Shriram Finance Ltd increased by 62% from Rs. 18,646Cr in FY22 to Rs. 29,206 Cr in FY23. Net profit increased by a much larger percentage from Rs. 2,721 in FY22 to Rs. 6,020Cr recorded a solid growth of 107%.

As of FY23, the company reported a net interest margin of 8.37% and return on assets of 2.89%. Currently, the stock is trading at a PER of 11.3 times and a price-to-book ratio of 1.58 times.

#5 Best NBFC Stocks in India – SBI Cards & Payments

SBI Cards & Payments Ltd is the second largest company in India.^nd Force (CIF) is the largest credit card issuer with 1.68 Cr cards and 18.2% market share in credit spending segment. The credit card issuer began operations in 1998. It was initially owned by State Bank of India and GE Capital (the financial services arm of General Electric).

In December 2017, State Bank of India and Carlyle Group acquired GE Capital’s stake in SBI Card. In March 2020, SBI Cards became the first pure-play credit card company to be listed on the Indian stock exchanges. It’s a title that continues to this day.

SBI Cards specializes in co-branded credit cards and launched its first co-branded card with IRCTC and Tata in 2006. In 2021, SBI Cards launched AURUM in the super premium segment targeting ultra high net worth customers. The card issuer added over 52.02 Lakh accounts in a year.

As of FY23, SBI card customers spent Rs. 2.62 Lakh Cr via credit card. The average consumer spent about Rs. 1.74 Lakh per annum, up from the annual expenditure of 1.42 Lakh in FY19.

NBFCs have had some trouble with non-performing assets (NPAs), which peaked at around 4.99% in FY21. However, this can be seen as a black swan event caused by the COVID-19 pandemic. The company again maintains NPAs at 2% level.

SBI Card earns most of its revenue from interest income (48%) and commissions (48%). The NBFC overall earned Rs. 12,757 Cr from the above source. During FY23, net profit grew by over 40% in a year from Rs. 1616 Cr in FY22 to Rs. 2258 Cr in FY23.

List of Best NBFC Stocks in India

Listed below are the top 10 NBFC stocks in India.

conclusion

We hope you have a better understanding of the best NBFCs in India and we have finally come to the end of the article. Some of these NBFCs offer profitable returns to investors with ROE in the range of 15-25%. However, investors should be careful about NPAs. Because they are not banks, their risk appetite is much higher than that of banks.

These companies are currently reporting high ROE, but this could change if NPAs start increasing. NBFCs then have to set aside huge profits to write off these non-performing assets. Therefore, investors need to find the perfect balance between high ROE and low GNPA at a low valuation (P/E).

Which of the following is your favorite NBFC and why? Let us know in the comments below.

Written by Nasir Hussein

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