India NBFCs "Q1 FY27E: strong momentum despite macro headwinds" Srivastava

Research evidence excerpt

India NBFCs "Q1 FY27E: strong momentum despite macro headwinds" Srivastava

Global Research

2 July 2026ab

India NBFCs Equities

IndiaQ1 FY27E: strong momentum despite macro

headwinds Financial Services

Alok Srivastava

Analyst

alok.srivastava@ubs.com

We forecast AUM growth of 2-10% QoQ +91-22-6155 6037

We expect strong growth and asset quality for retail NBFCs in Q1, despite a weaker Yash Agarwal

macro, although there may be some pressure on margins driven by higher cost of funds. Analyst

We forecast 2-10% QoQ AUM growth for retail NBFCs under our coverage and 2- yash.agarwal@ubs.com

3% QoQ growth for covered power financiers in Q1. CRIF Bureau credit data has +91-22-6155 6007

indicated that growth in the retail and SME segments such as auto, personal loans (PL), Karan Paresh Trivedi

loan against property (LAP) and microfinance (MFI) has been strong in Q1, while Associate Analyst

unsecured business loan growth remained weak. We expect some sequential karan.trivedi@ubs.com

moderation in margins for most NBFCs as funding costs have inched up in the quarter. +91-22-6155 6177

Asset quality across segments such as MFI, CV, PL and LAP remained strong in April and

May with no material signs of macro weakness. Among large NBFCs, we expect AUM to

grow 23% YoY for Bajaj Finance (BAF), 22% for Chola and 15% for Shriram. We expect

credit costs to AUM for both BAF and Chola to moderate sequentially, although

guidance on growth and asset quality will be important. We also expect stable asset

quality and an improvement in core margin for Shriram. .)

Cost of funding inched up during the quarter

Yields for NBFC AAA and AA bonds inched up during the quarter from January 2026

levels, but have moderated to some extent since the RBI policy meeting in June. NBFCs