NBFC Stocks: Brokerage has given a target of 26% upside on these 3 stocks, on the basis of AI they can give competition to big banks in 15 years – Market

The brokerage estimates that the share of NBFCs in the credit market in India may increase rapidly in the coming times. At present, the share of credit available to MSME sector in the banking system is very low.

According to the report, MSMEs in India get only 7-8% of the total credit from banks. Apart from this, there is still a large unorganized sector in the country, which the traditional banking system is not able to cover completely. This is the gap where NBFC companies can get an opportunity for rapid growth. Nomura estimates that the NBFC sector’s share in total system credit could reach around 33% by FY 2041.

AI technology will change the way of giving loans

The report says that the use of AI based engines is increasing rapidly in the NBFC sector. These systems help identify potential customers by analyzing large amounts of data. Customers with high digital footprint, such as those who shop online or do high UPI transactions, are now becoming an attractive segment for NBFC companies.

With the help of AI, the process can be faster and efficient in high-volume segments like microfinance, two-wheeler loans, personal loans and business loans. However, the brokerage has also said that there are still some uncertainties regarding the regulatory framework in this sector.

Highest upside potential in Tata Capital

According to Nomura report, the most potential upside among the three companies is seen in Tata Capital. The brokerage has given a target price of ₹400 for this stock, which suggests a potential upside of about 26% from the current level.

The company’s loan portfolio is quite diversified, comprising about 60% retail lending and 40% SME and corporate loans. Housing finance has the highest contribution in the retail segment. Nomura believes the company’s return on assets could improve in the coming three years, especially due to lower credit costs in the motor loan and business loan segments.

L&T Finance’s AI based strategy

L&T Finance has developed AI based underwriting and portfolio monitoring systems over the last few years. At present, retail loans constitute about 98% of the company’s total loan portfolio. The company has registered a growth of about 28% CAGR in the retail loan segment between FY22 to FY25. The brokerage has set a target price of ₹325 for the stock, which suggests about 20% upside from current levels.

Piramal Finance is also changing rapidly

Piramal Finance is also rapidly shifting its business model towards retail lending. The retail segment now accounts for 82% of the company’s total loan portfolio. It is an upper-layer NBFC with an AUM of around ₹96,700 crore. Nomura estimates that the company’s AUM may grow at about 26% CAGR between FY26 to FY28. The brokerage has given a target price of ₹2,150 for this stock, which shows a potential upside of about 21%.

Neutral rating on HDB Financial Services

However, the brokerage has given Neutral rating on HDB Financial Services. For this, a target price of ₹ 760 has been fixed, in which the possibility of upside of about 13% has been said. According to the report, the company has a strong foothold in traditional products like asset financing, but loan growth in recent years has been slightly slower than its competitors.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice in any way. ET NOW Swadesh recommends its readers and viewers to consult their financial advisors before taking any money-related decisions.