The growth in assets under management (AUM) of NBFCs and HFCs is likely to be at 9-11 per cent in FY23 compared to a rise of 9.5 per cent in the last fiscal. In fiscal 2022, the rise in AUM of non-banking financial companies (NBFCs) and housing finance companies (HFCs) was largely driven by the steep growth witnessed in Q4 FY22, rating agency ICRFA Ratings said.
While HFCs grew close to 10 per cent, the NBFC retail segment rose 8.5 per cent and the NBFC wholesale segment by about 12 per cent in the previous fiscal. The sharp growth in the NBFC wholesale segment was attributable to the low base and the uptick in credit by large and parent-backed NBFCs, which increased their supply chain, capital market and other corporate exposures, the agency said in the note.
"We continue to maintain the growth estimate for FY2023 for NBFCs and HFCs (excluding infra-financing entities) at 9-11 per cent," it added. On the sector funding resources, the agency said the non-convertible debenture (NCD) issuances by NBFCs and HFCs in Q1 FY2023 hit a multi-quarter low -- around 28 per cent lower than Q1 FY2022 and 65 percent less than Q1 FY2021.
The issuances were lower by approximately 22-28 percent compared to Q1 FY2020 and Q1 FY2019. The hike in the repo rates by the Reserve Bank of India (RBI) in May and June 2022, along with the elevated inflation prints, have affected investor appetite.
While the overall issuances were affected by the sharp fall in the participation of public sector undertakings (PSUs) operating in this space, private entity issuances were also down in Q1 FY2023 on a year-on-year basis, the note said.
The agency said, going forward, sell-downs - securitisation or direct assignment (DA) - may emerge as the key funding source for the sector as asset quality-related concerns have reduced and the revival in growth observed in the recent past would support the sell-downs. The sell-down market has also expanded over the past few years with the improvement in the share of non-priority sector assets in the overall volumes and diversification in the investor base. Retail funding via deposits may also witness a revival with the increase in the interest rate for other funding sources as entities try to leverage their franchise.
