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MOSL: FINANCIALS – NBFC-Analyzing the deposit franchise for NBFCs; BAF, PNBHF outperform peers on deposit front

Financials - NBFC: Analyzing the deposit franchise for NBFCs; BAF, PNBHF outperform peers on deposit front

 

We analyzed the liability trends of some leading NBFCs, with a special focus on the deposit franchise. Over the past four years, Bajaj Finance (BAF) has outperformed peers, with a CAGR of 87% in the number of depositors (accounts) and 145% in deposits. PNB Housing Finance (PNBHF) and Shriram Transport Finance (SHTF) have also performed well, with a deposit CAGR of 64%/37%. HDFC has been treading steadily, and its depositor base of nearly 2m is ~14x of the next largest competitor. Only MMFS has witnessed a steady reduction in its depositor base and dependence on deposits. 

HDFC – depositor base by far the largest, but growth modest

HDFC has by far the largest depositor base approaching 2m customers. However, while the company has done well on asset growth, it has lagged slightly on the deposit side. Depositor base CAGR has been only 2% over the past four years (FY14-18). Overall growth in deposits has been driven more by an increase in the average ticket size – at 11% CAGR to INR0.5m. Note that this could also be due to the mix shift from retail to corporate deposits. 

Bajaj Finance – superior performance on values/volumes

BAF’s management has a clear-cut objective to increase the share of deposits to 20-25% of total borrowings over the next three years. Going by the trend of the past four years, it is well on track to achieve the same, both by volumes and values. The company has recorded a CAGR (FY14-18) of 87% in the number of depositors and 145% in the deposit base. Average ticket size of INR0.75m is higher than that of HDFC. We attribute this to: (a) a higher minimum ticket size at BAF (INR25,000) compared to HDFC (INR20,000) and (b) possibly a higher share of non-retail deposits at BAF (60%) than HDFC.