FREE

MOSL: FINANCIALS - NBFCs 1QFY19 PREVIEW-Quarter to see impact of Ind-AS transition; Business remains healthy across segments

Financials - NBFCs 1QFY19 PREVIEW: Quarter to see impact of Ind-AS transition; Business remains healthy across segments

 

• 1QFY19 will be the first quarter when NBFCs would report earnings under Ind-AS. While the NHB has come out with a circular related to the transition, there has been no specific circular from the RBI. This has increased confusion related to the transition. Our interaction with companies suggests that they would be reporting earnings under Ind-AS norms, but regulatory reporting would continue to be based on the old format. The lack of clarity on accounting of provisions, securitization/assignment transition and accounting of interest income under Ind-AS has made it difficult to project earnings.
• Core housing growth has stabilized post RERA implementation, and tier II and III locations are the key growth drivers. For housing finance corporations (HFCs), we expect the share of non-retail loans in the overall portfolio to inch higher. Growth rate is expected to remain healthy for segments like consumer durables, two-wheelers and vehicle finance. M&HCV demand has been strong in the quarter, with the GoI’s infra push being the key driving factor.
• Farm loan waivers and normal monsoon have lifted sentiment in the rural economy. The focus on collections has also helped companies ensure strong recoveries. Vehicle financiers are expected to report healthy asset quality and growth. We expect a gradual improvement for microfinance institutions (the most impacted segment post demonetization) in terms of both growth and asset quality. Our interaction with gold financiers suggests that growth is slowly coming back.