News

Brokerage firm Nomura has initiated coverage on three non-bank lenders (NBFCs), Piramal Finance, L&T Finance and Tata Capital with a "buy" rating in its latest note on Wednesday, March 12. In addition to these, it has also initiated coverage on HDB Financial Services, with a "neutral" rating.Brokerage firm Nomura has initiated coverage on three non-bank lenders (NBFCs), Piramal Finance, L&T Finance and Tata Capital with a "buy" rating in its latest note on Wednesday, March 12. In addition to these, it has also initiated coverage on HDB Financial Services, with a "neutral" rating.Nomura believes that India's NBFC sector is set to witness a steep rise in competition as many lenders are now focused on expansion into new products and markets. Investment in and the development of AI engines across the sector is increasing and could potentially drive the structural transformations in the lending process, Nomura said in its note."We note that there is currently a regulatory gap in this area, and anticipate the RBI to establish a framework regarding the usage of AI in the financial sector," Nomura said. Out of the four NBFCs that Nomura has initiated coverage on, it expects three of those to deliver 20%-plus AUM Compounded Annual Growth Rate over financial year 2026-2028 along with Return on Equity (RoE) of mid-teens. Here's a look at Nomura's recommendations:Piramal Finance | Nomura has initiated coverage with a "buy" rating and a price target of ₹2,150. The target implies an upside potential of 21.2% from Wednesday's close. The brokerage believes that troubles the company faced in the past are nearly out of the way. The company has the scope to enhance branch productivity and Nomura sees a 26% AUM CAGR over financial year 2026-2028 for the company. The company has the potential to deliver mid-teen RoEs and thus the risk-reward scenario, as per Nomura, is favourable. "Stable credit costs is a key ask, while operational lapses in AI engines poses a downside risk," Nomura said.L&T Finance | The stock was an outperformer in 2025 and Nomura expects the stock to rise another 19.5% from current levels. Its "buy" rating comes with a price target of ₹325. Nomura's note stated that L&T Finance has nearly achieved its objectives highlighted in "Lakshya 2026" which is to increase its retail loan mix to 95% and a 25% CAGR in retail loans in 2026. It also said that L&T Finance has built commendable AI engines for underwriting and monitoring and it is already showing early signs of improvement in its asset quality. Macro events impacting rural customer base, disruption in AI engines and changes in management team driving AI are key downside risks.Tata Capital | One of the largest IPOs of 2025, Tata Capital shares could rise as much as 26% to ₹400, as per Nomura's note. The upside potential for Tata Capital is the highest among the three "buy" rated NBFCs by Nomura. While Tata Capital has a strong housing finance subsidiary, stabilizing the motor book is a near-term priority for the company, Nomura said. From 1.7% in financial year 2025, Nomura expects the company's Return on Assets (RoA) to expand to 2.3% by financial year 2028. Profitability will be driven by better credit costs in motor book and business loans, operating leverage and entry in high-yield segments. Any adverse developments at promoter group is a key downside risk.HDB Financial | Nomura is "neutral" on HDB Financial and its price target of ₹760 implies an upside potential of 13% from current levels. Nomura said that while HDB Financial has a record of high-teen RoE and 20%+ loan growth, it is currently going through a slow phase. A recovery in growth and asset quality will be a key positive trigger. Sustained asset quality stress is a key downside risk, while margin expansion from further rate cuts is an upside risk, as per Nomura.NewsLive TVMarketPopular CategoriesCalculatorsTrending NowLet's Connect with CNBCTV 18Network 18 Group :©TV18 Broadcast Limited. All rights reserved.