NBFC Report

Table of contents
Overview on NBFC

● Outlook on credit growth for NBFCs

● Outlook on yields, spread and its impact on NBFCs
● Growth comparison across various segments
● Competitive scenario
● Asset quality outlook
● View on borrowing mix of NBFCs
- Analysis on securitization
o Trend in spreads, delinquency, total asset size, Prepayment

o Asset class wise major originators

o Banks vs capital markets as investor

o Trend in PSL vs non PSL securitized loans

o Key regulations
● Capital raising requirement in the medium term
● Role of digital in origination and appraisal processes for NBFCs
● Investments and exits in NBFC space

2
Housing finance

Opinion

Outstanding portfolio growth and market dynamics

● Review of housing finance market growth

● Growth outlook for HFCs
● Analysis of large HFCs vis-à-vis small and medium sized HFCs
● Market share of HFCs vs. Banks including outlook
● Player wise market share of HFCs
● Breakup of HFC portfolio (Retail housing loans, Non-Retail)
● Ticket size wise breakup (Large > Rs 25 lakhs vs Affordable housing which is < Rs 25 lakhs)

Key growth drivers

Profitability

● Borrowing profile of HFCs

● Profitability outlook for Housing finance companies
● Comparison of profitability between large, mid-sized and small HFCs
● Profitability- Retail housing loans and non-retail segment

Asset quality

● Past trend in Gross NPAs

- Ticket size wise asset quality (Large vs affordable housing finance)
● Outlook on GNPAs

Key risks
Industry Information

● Underlying asset dynamics and demand drivers

● Regulatory framework
● Key risks

3
Low cost housing finance (Ticket size of <Rs 1 million)

Opinion

Outstanding portfolio growth and market dynamics

● Overview of low cost housing segment

● Review of low cost housing market growth
● Outlook for low cost housing finance focused HFC growth
● Key drivers for growth

Profitability

● Borrowing mix of housing finance players based on size

● Profitability of housing finance players based on ticket size

Asset quality
● Past trend in Gross NPAs
● Outlook on GNPAs

Industry Information

● State of the market and segmentation

● Competitive scenario and strategy
● Business model
● Key risks
● Schemes by government to support low cost housing finance

4
Infrastructure finance

Opinion

Outstanding portfolio growth and market dynamics

● Review of growth in overall infrastructure financing market

- Growth in infrastructure projects sanctioned by financial institutions
- Funding requirement
- Sector wise share of investments
● Comparison of NBFC funding vs other sources
● Growth outlook and market share outlook for NBFCs
● Key growth drivers
● New funding avenues for infrastructure sector
● NBFCs’ product mix and borrowing profile

Asset quality
● Past trend in Gross NPAs and restructured assets
● Outlook on GNPAs

Profitability

● Profitability - for overall NBFCs and for NBFCs excluding PFC and REC

Industry Information

● Underlying asset dynamics

● Regulatory framework
● Key growth drivers and risks in the finance market

5
MSME Finance

a) MSME - Secured loans

Opinion

Outstanding portfolio growth and market dynamics of LAP

● Review of LAP market growth

● Market size and growth
● Outlook for LAP market growth
● Key drivers for growth
● Market share of Non-banks vs. Banks including outlook
● Business models for Non-banks, Private sector banks and public sector banks
● Trend in share of LAP beyond top 10 cities
● Business sourcing mix for Non-Banks
● Profile of the Non-bank customers
● Collateral mix for Non-banks
● Key operating parameters (Interest rates, loan to vale, average ticket size, tenure)

Outstanding portfolio growth and market dynamics of non-LAP secured finance

MSME lending mix for NBFCs among trading, services and manufacturing

Profitability

● Comparison between Micro LAP and LAP

Asset quality

● Past trend in Gross NPAs

● Outlook on GNPAs

Risks factors

6
 b) MSME – Unsecured loans

Opinion

Outstanding growth and market dynamics

● Current market size and past growth

● Growth outlook for NBFCs
● Market share of NBFCs vs. Banks including outlook
● Growth drivers
● Sourcing mix
● New emerging practices

Asset quality

● Asset quality NBFCs vs. Banks and asset quality trend for NBFCs

Key Risks

Recent government initiatives focusing on MSME lending

7
Auto Finance

Opinion

Outstanding portfolio growth and market dynamics - overall auto finance

● Underlying asset growth outlook

● Growth outlook for NBFCs (including Segment wise growth expectations for new vehicle sales)
● Market share of NBFCs vs. Banks including outlook
● Player wise market share of NBFCs
● Breakup of NBFC portfolio
● Value proposition for NBFCs
● Indicative yields and GNPAs across segments
● Segment wise key parameters like Penetration, LTV, Tenure, ATS
● Comparison between small, medium and large companies
● Comparison between captive and non-captive companies
● Geographical branch penetration

Profitability – overall auto finance

● Borrowing profile
● Profitability
● Capital adequacy

Asset quality – overall auto finance

● Past trend in Gross NPAs
● Outlook on GNPAs

Success mantras in vehicle financing

Tractor finance
● Disbursement growth outlook
● Trend in tractor sales
● Tractor sales: growth drivers (near and long term)
● Region-wise and hp-wise tractor sales

8
 ● Key market parameters (Loan to value, finance penetration)
● Formal financiers’ vis-à-vis informal financiers share
● Share in disbursements for NBFCs, private sector banks and others
● Competitive advantages of NBFCs
● Profitability
● Asset quality
● Recent developments in the industry

Used CV finance market

● Disbursement growth outlook – LCV and MHCV separate calls

● CV sales trend – LCV and MHCV separate
● Share in disbursements for NBFCs vs Banks
● Customer profile and business sourcing
● Key market parameters (Finance penetration, risk profile, interest rate, loan to value ratio)
● Key success factors for used CV finance business
● Profitability
● Asset quality

Impact of GST
Used car finance market

● Current market size and past growth

● Disbursement growth outlook
● overview of unorganised and organised used car market
● Business models adopted by used car dealers
● Used car finance market unorganised vs organized
● Customer profile and characteristics
● Share in disbursements for NBFCs vs Banks
● Key parameters on which players compete
● Impact of GST on used car market
● Profitability
● Asset quality
● Future prospect of used car market and key risks

9
Industry Information – Overall Auto finance

● Underlying asset dynamics and demand drivers

● Evolution
● Regulatory framework
● Key growth drivers and challenges in the finance market

10
Wholesale finance

Opinion
Outstanding growth and market dynamics

● Definition of ‘wholesale finance’ and its segmentation

● Current market size and past growth
● Market share of NBFCs vs. Banks
● Growth outlook for NBFCs
● Player wise market share of NBFCs
● Key competencies which will help NBFCs sustain business growth despite competition from banks
● Key operating parameters

Profitability

Asset quality

Key risks and measures to mitigate it

11
Micro finance

Opinion

Outstanding portfolio growth and market dynamics

● Review of AUM growth for MFIs

- Growth in ticket size and number of clients
- Impact of demonetization
● Growth outlook for MFIs – separately for players with SFB license
● Impact of small finance bank licenses on the MFIs
● Market share of MFIs vs. Banks including outlook
● Key trend of MFIs and Bank portfolio (Average ticket size, Loan portfolio)
● Player wise market share of MFIs
● State wise split of MFI AUM and client base
● State wise portfolio growth of MFIs
● Urban rural client mix of MFIs
● Proportion of loans given for income generation vs consumption

Profitability

● Borrowing profile
● Trend in securitization
● Profitability outlook for players with SFB license and without SFB license

Asset quality

● Past trend in Gross NPAs

● Asset quality in key states
● Outlook on GNPAs

Industry Information

● Evolution of the industry

● Business models
● Regulatory framework
Key growth drivers and risks in the finance market

12
Gold Loan

Opinion
Outstanding portfolio growth and market dynamics

● Review of the gold loan market

● Market share of NBFCs vs. Banks including outlook
● Growth outlook for NBFCs
● Region wise breakup of NBFC portfolio
● Player wise market share of NBFCs

Profitability

● Past and future trend of yield on advances and cost of borrowings of NBFCs
● Profitability
Sources of funds for NBFCs

Asset quality

● Past trend in Gross NPAs

● Outlook on GNPAs
Emergence of online gold loans
Sensitivity of gold prices and LTV on probability of default

Industry Information

● Underlying asset dynamics and demand drivers

● Features of gold loans (Interest rate, tenure, LTV, ATS), comparison with personal Loan
● Regulatory framework
● Key growth drivers and risks in the finance market

13
Consumer durable finance

Opinion

Outstanding growth and market dynamics

● Current market size and past growth

● Growth in underlying assets and share of consumer durables in total domestic sales
● Growth outlook for NBFCs
● Key growth drivers
● Competition analysis: Market share of NBFCs vs. Banks
● Key consumer durable financing schemes and scheme structure
● Key market trends (Loan to Value, average ticket size, tenure. subventions etc.)

Profitability and asset quality

● Revenue stream for a financier
● Costs of financier
● Level of gross non-performing assets for NBFCs

14
Construction equipment loans

Opinion
Disbursement growth and market dynamics

● Growth in disbursements – Review and outlook

● Growth outlook for NBFC Assets under management
● Construction equipment sales trend
● Organized vs unorganized segment
● Finance penetration
● Market share of NBFCs vs Banks
● Breakup of NBFC portfolio (new vs used; Contractor vs. Hirer/Rental)
● Player wise market share of NBFCs

Profitability

● Borrowing profile
● Profitability

Asset quality

Recent initiatives and trends in the consumer equipment finance industry

Impact of demonetization and GST

Key challenges

Industry Information

● Underlying asset dynamics and demand drivers

● Regulatory framework
● Key success factors and challenges in the finance market

15
Education Loans

Opinion

Outstanding portfolio growth and market dynamics

● Review of growth in overall education loan market

● Key drivers for growth
● Outlook for Education Loan market growth
● Segment wise distribution of loans given.
● Market share of Non-banks vs. Banks including outlook
● Offerings of Banks vs NBFCs
● Share of NBFCs in the Overseas Market
● Player wise market share of NBFCs
● Growth trend of NBFCs
● Portfolio Mix of NBFCs

Profitability

● Borrowing profile – for overall NBFCs

● Profitability - for overall NBFCs

Asset quality
● Past trend in Gross NPAs

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