Now Reading: NBFCs face up to 12% EPS cut as cost of funds rises: Nomura
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NBFCs face up to 12% EPS cut as cost of funds rises: Nomura
Nomura has warned that a 50-60 basis point rate hike could cut FY27 earnings per share (EPS) of covered non-banking financial companies (NBFCs) by 1 to 8%, with the impact potentially reaching 12% over FY27-28. The brokerage said NBFCs will pass the higher cost to customers only from FY28, but structural EPS growth of 16 to 28% is projected for FY27-29.
Business Today and The Economic Times both report that bond yields for AAA and AA+ rated NBFCs have risen 29 to 70 basis points since the RBI's hawkish monetary policy tilt on 19 August. Bond issuance by Bajaj Finance, L&T Finance and HDB Financial Services lagged year-ago levels in the first half of FY27. Regulatory developments, including insurance distribution reforms and hesitation over flexi loans, are flagged as a bigger concern than rate hikes.
The Economic Times notes that cost of funds for covered NBFCs rose 6 to 42 basis points sequentially in Q1FY27. Nomura has set 12-month price targets including Rs 1,270 for Bajaj Finance, Rs 415 for Tata Capital and Rs 370 for L&T Finance.
Indian Opinion Analysis
The two outlets carry nearly identical Nomura analysis, but The Economic Times frames the EPS hit as potentially 12% over FY27-28, while Business Today reports only the 1 to 8% FY27 range. The Economic Times also adds detail on the bond yield rise since the RBI's August 19 minutes and the lagging bond issuance by Bajaj Finance, L&T Finance and HDB Financial Services, giving the cost pressure a sharper, more immediate context. Both outlets agree that regulatory changes around credit-life insurance and flexi loans are the bigger concern for the sector, and that structural EPS growth of 16 to 28% over FY27-29 remains intact.
Coverage: 2 sources, 2 neutral
Sources (2): businesstoday.in (neutral report), economictimes.indiatimes.com (neutral report)
This brief was synthesised by AI from the 2 sources linked above, so one read covers every framing they carry. Methodology and corrections.
