Icra Ratings, Real Estate News, ET RealEstate

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MUMBAI: Assets under management of the non-bank financial corporations segment declined in the first quarter of 2021-2022 due to lower disbursements and shrinking portfolio, according to a report.

After rising slightly in the third and fourth quarters of FY2021, disbursements for NBFCs and housing finance companies (HFCs) declined again in the first quarter of FY22, and declined by about 55% on a sequential basis, Icra Ratings said in the report.

“Given these moderate disbursements and the reduction of the portfolio in the absence of any moratorium as in the first quarter of fiscal 2021, the (AUM) of the NBFC segment decreased in the first quarter of fiscal 2022, while HFC AUMs remained stable, ”the agency said.

While sector disbursements picked up quite sharply in July 2021 due to pent-up demand, their sustainability would depend on broader macroeconomic indicators, he added.

According to the agency’s vice president and sector head (financial sector ratings) Manushree Saggar, the second wave temporarily delayed the recovery of the sector.

Icra expects aggregate disbursements for FY2022 to be around 6-8% year-over-year higher, following two consecutive years of year-on-year contraction. the other, she said.

“From an assets under management perspective, the sector is expected to grow 8-10% in fiscal 2022. Growth would be driven by improved demand from all key target segments compared to fiscal year 2021, based on a low base, ”Saggar said.

The quality of assets of non-bank entities weakened quite sharply in the first quarter of fiscal 2022 due to localized lockdowns imposed by various states due to the second wave of COVID-19 infections, which had an impact on the process of collecting these entities, the agency said.

Asset quality figures are expected to moderate as the trend in collection efficiencies (CE) continues to remain encouraging, he added.

The agency maintains its expectation of a 50-100 basis point (bps) increase (net of collections and write-offs) in delinquencies in fiscal year 2022, assuming there are no more lock-ups induced by COVID-19.

As pressures on asset quality persist, the increase in overall provisions, which is currently 1.7 times pre-COVID (December-19) levels, is providing some comfort. This would give entities some leeway. sufficient maneuver to technically amortize and clean up their balance sheets, ”said Saggar.

Depreciation in the NBFC sector remained high in the first quarter of fiscal 2022, she noted.

Given the uncertainties in the operating environment, depreciation is expected to remain high in FY 2022 – similar to last fiscal year (around 2.4% of assets under management for NBFCs and 0.3% for HFCs ), she said.

NBFC credit costs rose sharply in the first quarter of fiscal 2022, with depreciation remaining high and provisions increasing due to rising delinquencies, the agency said.

While HFC’s NPA / Stage 3 also increased during the period, credit costs moderated compared to Q4 FY2021 as provisions did not increase significantly like NBFCs and depreciation was negligible.

As a result, net profits plunged during the quarter to their lowest level in the recent past.

Saggar said that assuming there are no further bottlenecks, NBFC earnings performance is expected to improve in subsequent quarters, as credit costs moderate as delinquencies reduce relative to at June 2021 levels.


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