The Hindu Business Line : Crisil expects better earnings for select NBFCs

NON-BANKING Finance Companies (NBFCs) that have restructured their business models in the past three-four years are expected to report better earnings in the future.

A study by rating agency Crisil on the 25 rated NBFCs shows that those that have re-focused their business are in better shape, with improved asset quality and profitability.

Upgrading the fixed deposits ratings of three NBFCs — Sundaram Finance, Lakshmi General Finance and Tata Finance Ltd — Crisil on Monday said, in its view, these entities would maintain good profitability levels going forward, which would bolster their financial risk profile.

Crisil's analysis indicates that these entities have been able to diversify their funding avenues and reduce cost. They have also improved their asset quality. These are NBFCs that have survived the shake-out of the sector in the '90s and emerged stronger overtime, with their business models becoming more robust.

In fact, many of them have exited from the business of leasing equipments and machinery to corporates and focused on retail car and truck financing.

According to Crisil, Tata Finance's sharp focus on its core vehicle finance and the integration of its operations with Bureau of Hire Purchase, a division of Tata Motors, are expected to help improve its earnings.

For Sundaram Finance, its steadily improving asset quality (gross NPA 0.67 per cent) and good growth in disbursements are expected to drive its profitability further. Crisil expects Sundaram Finance's capital position to remain healthy, as the company has not planned any large investment in the medium term.