NBFCs across the spectrum post record disbursements in FY23

FY23 turned out to be a blockbuster year not only for banks but also for the non-banking financial companies (NBFCs). With a pick up in consumption after two years of the pandemic, non-banking lenders across segments saw record growth in disbursements and assets during the previous fiscal.

The total disbursements of Cholamandalam Finance jumped 87 per cent year-on-year to ₹66,532 crore (₹35,490 crore) in FY23 driven by growth across vehicle financing, new businesses and home loan categories.

To be sure, vehicle financing still constitutes over 60 per cent of Chola’s loan book. The company has forayed into home and business loan categories to diversify its asset book.

Mahindra & Mahindra Financial Services, another major player in vehicle financing, also recorded 80 per cent growth in its disbursements in FY23 to ₹49,541 crore. 

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In the company’s Q4 earnings call, Ramesh Iyer, Vice-Chairman & MD, attributed the higher disbursements to buoyancy in the rural market which pushed the demand for vehicles, tractors, pre-owned vehicles.

Sundaram Finance logged its highest-ever annual disbursement in FY23 at ₹20,966 crore (58 per cent growth), as against ₹13,275 crore in FY22.

This performance came after three challenging years, starting with slowdown in CV sales and followed by two years of Covid, said Rajiv C Lochan, MD.

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Growth drivers

NBFCs catering across consumer finance, small business loans and loans against property (LAP), too, have seen growth in disbursements.

Kaitav Shah, BFSI Research Analyst at Anand Rathi Institutional Equities, said technology adoption, new businesses lending, fintech partnerships and usage of GST and alternate data for underwriting are some of the factors driving the loan growth of NBFCs compared with banks.

Even smaller NBFCs like Five Star Business Finance saw its disbursement almost double to ₹3,391 crore in FY23. The company primarily offers small loans for business purposes, asset creation, and other economic purposes to micro-entrepreneurs and self-employed individuals. Higher disbursements also propelled the total assets under management (AUM) of several lenders.

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Bajaj Finance’s total loan book grew 29 per cent during the previous year to ₹2.47-lakh crore. “We disbursed 29.6 million loans. We added 11.6 million new customers to the franchise, the highest-ever customer addition that we’ve actually done ever as a company,” Rajeev Jain, MD, Bajaj Finance Ltd, said in the Q4 FY23 earnings call.

Shriram Finance saw its assets grow 46 per cent to ₹1.86-lakh crore. The total assets of Cholamandalam Finance crossed the ₹1-lakh crore mark in the previous fiscal, growing 38 per cent year-on-year.