Is NBFC A Good Bet?
A recent Boston Consulting Group and FICCI report predict that India is poised to clock a fintech sector valuation of $150-$160 bn by 2025 translating to the incremental value creation of ~$100 bn. India is amongst the fastest-growing Fintech markets in the world. Of the 2,100+ FinTech’s existing in India today, over 67% have been set up in the last five years. The Fintech movement has given a new direction to NBFCs in India.
Also, the Reserve Bank of India (RBI) has recently allowed banks to co-mend with all registered NBFCs to improve the credit flow to weak sectors of the economy. This has reinforced the investor’s assurance on the credibility and investing opportunities that NBFCs still offer. However, investors still look cautiously at this sector before putting any money considering the past NBFC crisis in India. NBFCs have come a long way in terms of their scale and diversity of operations. They alone count for a 12.5% rise in the GDP of our country. NBFC’s like Bajaj Finance, Muthoot Finance, etc., catering to a wide variety of customers in rural and urban areas by providing financial services. Their role in providing assistance and guidance during emergencies can’t be overlooked.
What New Age Investors Sees In An NBFC Company Before Investing
Gone are the days when investors used to assess NBFCs based only on the traditional matrices like offered rate of returns, safety credentials by rating agencies, liquidity risks, et al. New-age investors have now expanded assessment criteria to include management decisions on growth vs. profit strategy, customer base expansion, portfolio offerings, business expansion strategy, omnichannel customer servicing experience, and powered websites by machine learning BOTs, among others.
Additionally, investors should assess if NBFC specializes in a particular range of product offerings that provide differentiated values to customers. It is also essential to know Risk diversification policies adopted, liquidity options available for investors, and asset management policy across the portfolio while investing in any NBFC. Investors should look at how well NBFC is established to command leverage in the market among its peers for any of its vital business decisions. For example, Cholamandalam Investment & Finance Ltd began as an equipment financing company and has now evolved into a full-service financial services provider.
Future Of NBFC’s In India
The Fintech segment in India has seen an exponential rise in funding over the last few years; investments worth more than $8 bn have already been witnessed across various stages of investment in 2021.
It is worth seeing if the Fintech revolution will make money for NBFC investors in the coming time or are looking at another crisis ballooning up.