Infrastructure-focused Non-Banking Financial Companies (NBFCs) are likely to post 10%-12% loan growth in FY23 on rising credit demand and renewed government efforts to revive public works projects, rating agency ICRA said on Thursday, April 21.
In FY21, Infrastructure Finance Companies (IFCs) posted a 16% growth in advances, and in FY20 expanded loans by 14%.
“While the tepidness in recent years was primarily due to the stagnation in banking sector credit to the infrastructure segment, the trend in 9MFY2022 (April-December) was characterised by the moderation in the portfolio growth of IFCs as well,” ICRA said.
In FY21, IFCs’ overall loan book grew at a rapid pace, led by disbursements related to the liquidity package for power distribution companies with Power Finance Corp Ltd (PFC) and REC Ltd as lending partners, it said.
As of December 31, infrastructure-focused NBFCs’ outstanding loans reached Rs 13.8 lakh crore. Public sector infra financiers continued to dominate the space, accounting for 94% of outstanding credit.
In terms of sectoral exposure, concentration towards the power sector remained higher for IFCs, with a share of 61% of the portfolio as of December 31 compared to the 52% share of the power sector in banks’ exposure to the infrastructure segment, ICRA said.
On the asset quality front, ICRA expects the reported stage 3 assets (gross bad loans) to decline by 25-30 basis points (bps), supported by pending resolutions and loan book growth. As of December-end, the gross stage 3 asset ratio of IFCs was 4.1%, excluding bad loans of Indian Railway Finance Corp., ICRA said.
IFCs have reverted to a healthy profitability trajectory with a decline in non-performing assets (NPAs) and the cost of borrowings. This is driving healthy internal capital generation and the capitalisation level remains adequate, ICRA said, adding that a credit growth rate of over 10%-12% range in the present fiscal year may force some lenders to raise capital.