CV-financing NBFCs’ AUM to grow 7-9% in FY23: ICRA

Assets under management (AUMs) of non-banking finance companies (NBFC) financing commercial vehicles are expected to grow 7-9% in the current financial year as overall economic activities revive, rating agency ICRA said in a report. “Ability of the borrowers to pass through the fuel cost escalations adequately in the near term would remain critical,” a release quoted R Srinivasan, vice president – financial sector ratings, ICRA, as saying.

CV-financing NBFCs faced multiple headwinds since the start of this pandemic. Borrowers in this segment faced challenges such as depressed load availability and an increase in fuel prices. Srinivasan said diesel prices have gone up by more than 50% over the last two years and could increase by another 5-15% in the near term.

Borrowers were protected during the first wave with an option of a moratorium, but this was not available in the second wave. CV financiers, therefore, were faced with increased stress, resulting in a sharp increase in delinquencies and high portfolio restructuring.

Despite these headwinds, CV financiers have grown at a pace of 2.5% during 9MFY22. According to a report, the used vehicle segment grew around 11% in the first three-quarters of FY22, compared to new vehicles, for which AUM declined by 5% during the period due to better unit economics.

The asset quality of commercial vehicle financiers is expected to improve in the current financial year due to a revival in economic activities.

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