Best NBFC Stock In India To Buy in 2024

In growing India, NBFC play a significant role in providing financial services to individuals and businesses by offering loans. In this blog, we will discuss the best NBFC stocks in India and how they are different from banks.

 

What are NBFC 

NBFC stands for Non-Banking Financial Company. These are basically financial institutions like banks, but without a banking license. They offer many of the same services like loans and investments like stocks and share acquisition, insurance business, commercial lending etc.

 

Top NBFC stocks in India

Here is the list of the best NBFC stocks in India to invest for the future: But one thing every investors need to know how to choose stocks for long term investment by analysing important ration in stock market.

 

1). Bajaj Finance Limited

Bajaj Finance is the biggest NBFC stock in India, listed on the stock market. They offer a wide range of financial products like loans and investments. Bajaj Finance is a good investment stock based on the following factors:

• Strong Market Position: Bajaj Finance has a market capitalization of 414,467.56 Cr, making it the market leader among all NBFC stocks.
• Diverse Products: They offer a variety of financial services for individuals and businesses, including home loans, car loans, business loans, and investments. They  also extend their services with the launch of IPO financing and company also plans to introduce new products to target rural  and semi urban market.
• Solid Performance: They've shown consistent growth in income and profits, in March quarter results company Net Profit is 14,451 Cr.
• Strong Management: A significant portion of the company is owned by the founders (promoter shareholding), which can indicate long-term commitment to the business.

Overall, Bajaj Finance appears to be a well-established NBFC with a history of strong performance and a diverse range of products. These factors may make them an attractive option for investors looking for exposure to the Indian financial services market.

 

 

2). Muthoot Finance Limited

Muthoot Finance offers a wide range of financial services products including foreign exchange, healthcare, insurance, real estate, and more. The company provides personal and business loans based on gold security.

The company has a presence in 29 states with more than 4,700 branches and holds 183 tonnes of gold jewelry as security.

 

Performance: Muthoot Finance made Rs. 13,362.32 crore in revenue over the past year. While their revenue has dropped slightly (-2%) compared to the year before, that's balanced out by their impressive profit margins. In fact, they keep a whopping 41% of their revenue as profit before taxes! This shows they manage their money well.

Here's another good sign: for every rupee they invest in the company (Return on Equity - ROE), they get back 16 rupees in profit. That's a very strong return! This makes Muthoot Finance one of the best NBFCs (non-bank financial companies) in India.

 

 

3). Shriram Finance Limited

 

Shriram finance is a major player in consumer finance, life insurance, housing finance, it the India's largest retail asset financing NBFC.

In Nov 2022, Shriram Group’s entities – Shriram Transport Finance Company Limited, Shriram City Union Finance Limited, and Shriram Capital Limited – merged to form Shriram Finance Limited, on March 31, 2024.

Shriram Finance has been making a name for itself in the NBFC world.in March 2024 quarter results company generated 2021 Cr Net profit. 

Shriram Finance is no small player. They manage a massive Rs. 1.85 lakh crore in assets and serve a vast customer base of 73.24 lakh. This makes them one of the biggest retail NBFCs in India. They operate through a wide network of over 2922 branches across the country, employing over 64,000 people.
Overall, Shriram Finance appears to be a fast-growing and well-established NBFC with a strong presence in the Indian market.

 

 

4). Indian Railways Finance Corporation Limited

The Indian Railway Finance Corporation (IRFC) is a bit different from most NBFCs (Non-Banking Financial Companies). Founded in 1986, it acts as the financial arm of the Indian Railways, raising money from local and international markets. It's owned by the Indian government and operates under the Ministry of Railways.

What makes IRFC unique?

Specific Goal: IRFC's main purpose is to borrow money at good rates (called "Extra Budgetary Resources") to help the Indian Railways with their financial needs.
Strong Performance: Despite not being a typical NBFC, IRFC shows impressive financial results. They generated Rs. 25,899.53 crore in revenue over the past year, with an 18% annual growth rate. Additionally, they maintain healthy profit margins (27% before taxes) and a good return on equity (ROE) of 13%.
Overall, IRFC stands out as a well-performing financial entity playing a crucial role in supporting the Indian Railways.

IRFC is one of the best railway stocks in India

 

 

5). L&T Finance Holdings Limited

L&T Finance offers a wide range of financial products like loans for farms, vehicles, homes, and businesses. They're registered with the RBI, a big plus.

Strong Presence:

-    Over 197 branches and 1395 Micro Loan meeting centers
-    Large customer base of over 1.11 crore (11.1 million) people
-    Employs over 22,500 people

Financials

Made Rs. 13,085.61 crore in revenue over the past year, growing at 8% annually.
While revenue growth is good, their profit margins are currently negative (-4%). This means they're spending more than they're earning.
Their return on equity (ROE) is 7%, which is decent but could be better.
Overall, L&T Finance is a well-established NBFC with a large customer base. However, their profitability needs improvement.

 

 

6). Poonawala Fincorp Limited

 

Poonawalla Fincorp is a financial company (NBFC) that offers loans to businesses and individuals. They're part of the Cyrus Poonawalla group, a large Indian company. It provide loans for businesses and individuals.

Financial Performance

• Revenue: Made Rs. 2,706.63 crore in the past year, but their revenue has decreased slightly (-2%) compared to the year before.
• Profits: They have a healthy profit margin (39%), meaning they keep a good chunk of their revenue as profit.
• Return on Equity (ROE): This is a measure of how efficiently they use their money. While their ROE is decent at 9%, it could be better.

Poonawalla Fincorp seems to be profitable even though their revenue has dipped a bit. However, their return on equity could improve.

 

 

How NBFCs are different from Banks

While NBFCs undertake lending activities and offer various financial products akin to banks, they are constrained by certain regulatory limitations:

 

1. Absence of Banking License

NBFCs lack the authorization to operate savings and current accounts, a privilege reserved for banks with valid banking licenses.

 

2. Restriction on Demand Deposits

Unlike banks, NBFCs are prohibited from accepting demand deposits, restricting their ability to facilitate spontaneous withdrawals.

 

3. Exclusion from Payment and Settlement System

NBFCs are not integrated into the formal payment and settlement system, impeding their capability to issue checks or offer online banking services.

 

4. Deposit Insurance Absence

Unlike conventional banks covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC), NBFCs do not extend deposit insurance facilities to their customers.

Despite these limitations, NBFCs remain lucrative investment options, especially in the Indian market. Among the plethora of NBFC stocks available, certain entities stand out as promising avenues for investors seeking substantial returns.

 

 

 

Conclusion

NBFCs have emerged as a crucial element of the Indian economy, particularly experiencing significant expansion in rural and small-scale sectors. Moreover, the surge in demand for NBFCs has been fueled by government initiatives such as the Pradhan Mantri Awas Yojana, among others.
Looking ahead, there are ample opportunities for further growth, especially considering the current strain on Public Sector Banks caused by a substantial volume of non-performing assets. By demonstrating the potential of their cost-effective, diversified, and tailored product offerings, coupled with efficient outreach and enhanced risk management systems, NBFCs could potentially alleviate some of the pressure on the banking sector.