CRISIL Research

NBFC Report - 2020

Research
NBFCs in a post-pandemic world
The declining trajectory of non-bank credit growth began in the second half of 2018-19 amidst the
economic slowdown and continued in fiscal 2020 with the onslaught of the pandemic. The gradual
impact of the economic slowdown on the sector was expected to enable defence mechanisms. But, the
pandemic rendered an immediate and debilitating impact.

The Reserve Bank of India (RBI) consented to a moratorium on loans from banks until August 2020, but
not on non-banks capital market borrowings. The primary challenge for most non-banks, then, is
ensuring adequate liquidity to meet repayments in the near term. The secondary challenge is ensuring
that asset quality remains under control through various precautionary measures, including contact
with, and support to borrowers in this unprecedented crisis.

Non-bank finance companies (NBFCs) will need to recalibrate their strategies in a post pandemic world.
CRISIL view
Recalibrate strategies in a post pandemic world.

Ÿ How will strategic shifts impact Ÿ What key factors could drive
credit growth in the sector? growth?

Ÿ Will the earnings growth

Ÿ When will liquidity improve?
trajectory worsen?

Ÿ Will the central government’s

Ÿ How much capital will NBFCs
Read our and RBI’s liquidity enhancement
need over the next two years?
report measures help NBFCs?
to learn Ÿ What could separate the
Ÿ Can NBFCs achieve pre-2018 winners from the losers?
growth in the medium term or
will growth remain anaemic? Ÿ Where are the opportunities
for growth?
Our coverage
Ÿ Overall and segment-wise impact of the
pandemic on NBFCs

Ÿ Detailed assessment of the competitive

scenario with banks and the market
share of NBFCs

Ÿ Perspective of regulatory impact

Ÿ Company profile along with financial

and operational benchmarks

Ÿ Advancement in digital platforms for

lending
NBFC Report
Extensive quarterly coverage on 12 key NBFC segments

Sectoral coverage NBFC overview Segment-wise coverage

Wholesale Ÿ Impact of COVID-19 on NBFC segment: COVID Impact

COVID on
Impact oneach
each
segment
segment
MSME (including loan - Credit growth
Outlook on underline
against property) - Asset quality Outlook on underline segment
segment

Infrastructure - Liquidity & Fund raising Market

Market share
share ofofNBFCs
NBFCs vsvs
banks
Ÿ Government and RBI measures
banks
Auto Growth outlook for NBFCs
Ÿ Relative attractiveness of the NBFC segments Growth outlook for NBFCs
Profitability of NBFCs:
Housing based on growth and profitability outlooks Review & outlook
Profitability of NBFCs: Review
Low-cost Housing* Ÿ Outlook on yields and spreads for various asset Asset quality: Review &
& outlook
classes outlook
Construction AssetKey
quality: Review
growth drivers and&
Equipment Ÿ View on the borrowing mix of NBFCs challenges
outlook
Ÿ Movement in player wise interest rate spreads
Gold Key growth drivers and
Ÿ Capital raising requirements challenges
Microfinance
Ÿ Role of digital in origination and appraisal
Consumer Durables Ÿ Securitisation market overview and trend

Education Ÿ Industry overview and regulatory changes

Personal Loans Ÿ Quarterly update monitoring performance & outlook

Note: *Ticket size lower than Rs. 10 lacs

Source: CRISIL Research
Covering more than
200 non-banks
Company Profile and Interactive Tool
To measure standalone and comparative performance indicators

Company Interactive tool- Interactive tool-

profile Operating Financial
Benchmarks Benchmarks

Ÿ Company history Ÿ Borrowing mix 1) Industry to Company

Ÿ Rating information Ÿ Profile mix 2) Industry to Industry
Ÿ Key financial indicators of the Ÿ Branches 3) Company to Company
past five years Ÿ Employees
Ÿ Profit and Loss Statement of the Parameters of Assessment
Ÿ Operating expense by total
past five years income Ÿ Advances
Ÿ Balance Sheet of the past five Ÿ Profit after tax per employee Ÿ Return Ratio
years
Ÿ Yield on advances Ÿ Asset Quality
Ÿ Profitability Ratios of the past
Ÿ Cost of funds Ÿ Spread Analysis
five years
Ÿ Total interest expenses Ÿ ROA Tree
Ÿ Borrowing Mix of the past five
years Ÿ Total income Ÿ Other Ratios
 Housing finance | Table of Contents (ToC)

Opinion Key growth drivers

Outstanding portfolio Profitability Asset quality

growth and market Ÿ Borrowing profile of Ÿ Trend in gross non-
dynamics HFCs performing assets
Ÿ Profitability outlook for (GNPAs)
Ÿ Review of growth in the housing
HFCs - Ticket size wise
finance market
Ÿ Comparison of asset quality
Ÿ Impact of COVID19
profitability between (large vs
Ÿ Growth outlook for housing finance
large, mid-sized and affordable
companies (HFCs) in FY 2021 & FY
small HFCs housing finance)
2022
Ÿ Profitability - retail Ÿ Outlook for GNPAs
Ÿ Analysis of large HFCs vis-à-vis
housing loans and non-
small and medium sized HFCs
retail segment
Ÿ Market share and outlook of HFCs
vs. banks
Ÿ Player-wise market share of HFCs
Key risks
Ÿ Breakup of HFC portfolio (retail and
Industry Information
non-retail housing loans)
Ÿ Ticket size wise breakup (Large > Rs Ÿ Underlying asset dynamics and demand drivers
25 lakhs vs Affordable housing < Rs Ÿ Regulatory framework and changes
25 lakhs) Ÿ Key risks and challenges
 Low cost housing finance (Ticket size < Rs 1 million)

Opinion

Outstanding portfolio growth and Profitability

market dynamics Ÿ Borrowing mix of housing finance players based on size
Ÿ Overview of the low cost housing segment Ÿ Profitability of housing finance players based on ticket
Ÿ Impact of COVID19 size
Ÿ Outlook for low cost housing finance focused HFC
growth in FY 2021 & FY 2022
Ÿ Key drivers for growth Industry Information
Ÿ State of the market and segmentation
Ÿ Competitive scenario and strategy
Asset quality Ÿ Business model
Ÿ Trends in GNPAs Ÿ Key risks
Ÿ Outlook for GNPAs Ÿ Government schemes to support low cost housing
finance
 Infrastructure finance

Opinion

Outstanding portfolio growth Asset quality

and market dynamics Ÿ Trends in GNPAs and restructured assets
Ÿ Review of growth in the overall infrastructure Ÿ Outlook for GNPAs in the wake of COVID19
financing market
- Growth in infrastructure projects
sanctioned by financial institutions Profitability
- Funding requirement
Ÿ Profitability - for overall NBFCs excluding PFC and
- Sector-wise share of investments REC (power finance corporation and rural
Ÿ Impact of COVID19 electrification corporation )
Ÿ Comparison of NBFC funding and other
sources
Ÿ Growth outlook and market share outlook for Industry Information
NBFCs for FY 2021 & FY 2022
Ÿ Underlying asset dynamics
Ÿ Key growth drivers
Ÿ Regulatory framework
Ÿ New funding avenues for the infrastructure
Ÿ Key growth drivers and risks in the finance market
sector
Ÿ NBFCs’ product mix and borrowing profile
 MSME Finance

Opinion - MSME secured loans

Ÿ Impact of COVID19 Government measures to improve access to funds for MSMEs

Outstanding portfolio growth Asset quality

and market dynamics Ÿ Trends in GNPAs
Ÿ Review of growth in the market for loans against Ÿ Outlook for GNPAs in the wake of COVID19
property (LAP)
Ÿ Outlook for LAP market growth in FY 2021 & FY
2022 Profitability Risk factors
Ÿ Key drivers for growth
Ÿ Market share and outlook of non-banks vs.
banks
Outstanding portfolio growth and
Ÿ Business models for non-banks, private sector
banks and public sector banks
market dynamics of non-LAP
secured finance
Ÿ Profile of non-bank customers

Opinion - SME unsecured loans

Ÿ Current market size and growth Ÿ Profitability for NBFCs
Ÿ Growth outlook for NBFCs in FY 2021 & FY 2022 Ÿ Unsecured lending dynamics
Ÿ Market share and outlook NBFCs vs. banks
 Auto Finance I Overall auto finance

Opinion Industry Information

Outstanding portfolio Profitability Ÿ Underlying asset dynamics and

growth and market demand drivers

Ÿ Borrowing mix
dynamics Ÿ Profitability
Ÿ Evolution
Ÿ Regulatory framework
Ÿ Impact of COVID19 on the auto
Ÿ Overview of unorganised and
finance market
organised used car market
Ÿ Growth outlook for underlying Asset quality Ÿ Business models adopted by
assets
Ÿ Trends in GNPAs used car dealers
Ÿ Growth outlook for NBFCs
Ÿ Outlook for GNPAs Ÿ Key success factors for used
(including segment-wise growth
expectations for new vehicle commercial vehicles financing
sales) in FY 2021 & FY 2022 Ÿ Customer profile and business

Ÿ Market share and outlook of

sourcing
NBFCs vs. banks Ÿ Competitive advantages of

Ÿ Breakup of NBFC portfolio

NBFCs

Ÿ Segment wise key parameters

such as penetration, Loan to
Value, and tenure
Ÿ Comparison between small,
medium and large companies
Ÿ Comparison between captive and
non-captive companies
Ÿ Geographical branch penetration
 Auto Finance I Tractor and Commerial Vehicles (CVs)

Opinion

Tractor finance Used CV finance market

Ÿ Disbursement growth outlook for FY 2021 & FY 2022 Ÿ Disbursement growth outlook – separate growth
calls for light commercial vehicles (LCV) and medium
Ÿ Trend in tractor sales
to heavy commercial vehicles (MHCV)
Ÿ Tractor sales: growth drivers (near and long term)
Ÿ CV sales trend – LCV and MHCV
Ÿ Region-wise and hp-wise tractor sales
Ÿ Share in disbursements for NBFCs vs Banks
Ÿ Key market parameters (Loan to value, finance
Ÿ Profitability
penetration)
Ÿ Share in disbursements for NBFCs, private sector
banks and others
Used car finance market
Ÿ Profitability
Ÿ Current market size and past growth
Ÿ Asset quality
Ÿ Disbursement growth outlook for FY 2021 & FY 2022
Ÿ Recent developments
Ÿ Profitability
 Wholesale finance Consumer durable finance

Opinion Opinion

Outstanding growth and Outstanding growth and market

market dynamics dynamics
Ÿ Impact of COVID19 on the wholesale finance market Ÿ Market size and growth
Ÿ Wholesale finance | Definition and segmentation Ÿ Impact of COVID19
Ÿ Current market size and growth Ÿ Growth in underlying assets and share of
Ÿ Market share of NBFCs vs. banks consumer durables in total domestic sales
Ÿ Growth outlook for NBFCs for FY 2021 & FY 2022 Ÿ Growth outlook for NBFCs for FY 2021 & 2022

Ÿ Player-wise market share of NBFCs Ÿ Key growth drivers

Ÿ Key competencies to help NBFCs sustain business Ÿ Competition analysis | Market share of NBFCs
growth despite competition from banks vs. Banks
Ÿ Key operating parameters Ÿ Key consumer durable financing schemes and
scheme structure
Ÿ Key market trends (Loan to Value, average
Profitability Asset quality ticket size, tenure, subventions etc.)

Profitability and asset quality

Key risks and mitigation measures Ÿ Revenue stream for a financier
Ÿ Costs of financier
Ÿ Level of GNPAs for NBFCs
 Gold Loan

Opinion

Outstanding portfolio growth Asset quality

and market dynamics Ÿ Trends in GNPAs
Ÿ Review of the gold loan market Ÿ Outlook for GNPAs
Ÿ Impact of COVID19
Ÿ Market share and outlook of NBFCs vs. Banks
Ÿ Growth outlook for NBFCs in FY 2021 & FY 2022 Industry Information
Ÿ Region-wise breakup of the NBFC portfolio Ÿ Underlying asset dynamics and demand drivers
Ÿ Player-wise market share of NBFCs Ÿ Features of gold loans (interest rate, tenure, LTV,
ATS)

Profitability
Ÿ Trends in yield on advances and cost of Emergence of online gold loans
borrowings of NBFCs
Ÿ Profitability

Sources of funds for NBFCs

 Micro finance

Opinion

Outstanding portfolio growth Asset quality

and market dynamics Ÿ Trend in GNPAs
Ÿ Review of growth in assets under Ÿ Asset quality in key states
management (AUM) for micro-finance Ÿ Outlook for GNPAs in the wake of COVID 19
institutions (MFIs)
- Growth in ticket size and number of
clients
Industry Information
Ÿ Growth outlook for MFIs for FY 2021 & FY 2022
Ÿ Industry evolution
Ÿ Competitive scenario
Ÿ Business models
Ÿ Key trends in MFI and bank portfolios (average
Ÿ Regulatory framework
ticket size, loan portfolio)
Ÿ Player-wise market share of MFIs
Ÿ State-wise split of MFI AUM and client base
Ÿ State wise portfolio growth of MFIs
Key growth drivers and risks in
the finance market
Profitability
Ÿ Profitability outlook for NBFC MFI players
Ÿ Trend in securitization
 Construction equipment loans

Opinion

Disbursement growth and

market dynamics Asset quality
Ÿ Growth in disbursements – Review and outlook
Ÿ Impact of COVID19 on construction equipment
finance
Ÿ Growth outlook for NBFC AUM for FY 2021 & FY
Recent initiatives and trends
2022
Ÿ Construction equipment sales trends
Ÿ Organized vs unorganized segment
Ÿ Finance penetration
Impact of demonetization and GST
Ÿ Market share of NBFCs vs banks
Ÿ Breakup of NBFC portfolio (new vs used;
contractor vs. hirer/rental)
Ÿ Player-wise market share of NBFCs Key challenges

Industry Information
Profitability
Ÿ Underlying asset dynamics and demand drivers
Ÿ Borrowing profile
Ÿ Regulatory framework
Ÿ Profitability
Ÿ Key success factors and challenges in the finance market
 Education Loans Personal Loans

Opinion Opinion

Outstanding portfolio growth and Outstanding portfolio growth and

market dynamics market dynamics
Ÿ Review of growth in the overall education loan market Ÿ Review of growth in the overall personal loan
Ÿ Impact of COVID19 market
Ÿ Key drivers for growth Ÿ Impact of COVID19

Ÿ Outlook for market growth in education loan Ÿ Key drivers for growth

Ÿ Segment wise distribution of loans disbursed Ÿ Outlook for market growth in personal loan

Ÿ Market share of non-banks vs. banks including outlook Ÿ Market share of NBFCs vs Banks

Ÿ Offerings of Banks vs NBFCs Ÿ Key factors driving the personal loan market

Ÿ Share of NBFCs in the overseas market Ÿ Target customer segment for personal loans

Ÿ Player-wise market share of NBFCs

Ÿ Growth trend of NBFCs
Profitability and Asset Quality
Ÿ Profitability for overall NBFCs
Ÿ Portfolio mix of NBFCs
Ÿ Level of GNPAs for NBFCs
Profitability and Asset Quality
Ÿ Profitability for overall NBFCs
Fintech
Asset quality
Ÿ Trend in GNPAs
Ÿ Overview of fintech in India Ÿ Factors driving fintech
Ÿ Fintech adoption in India’s growth in India
lending market Ÿ Issues related to cyber
security and data privacy
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