Jefferies Recommends 11 NBFCs with Up to 48% Growth Potential

In a recent update, brokerage firm Jefferies has issued buy recommendations for 11 non-banking financial companies (NBFCs), projecting significant upside potential in their stock prices. The target prices set by Jefferies suggest gains reaching as high as 48% for some of these companies. Alongside these, the firm has placed several other NBFCs under a hold rating, including well-known names such as Mahindra Finance, LIC Housing Finance, and SBI Cards.

Jefferies conducted meetings with nine of the recommended companies and observed a generally positive performance during the July to September quarter. Most firms reported strong growth in loan disbursements and maintained stable asset quality despite ongoing economic challenges. While the cost of funds (CoF) has remained steady so far, there is some caution about potential increases if the Reserve Bank of India (RBI) decides to raise interest rates. Net interest margins (NIMs) are expected to stay stable in the near term, according to the companies' outlooks.

Among the top picks, Cholamandalam Investment and Finance Company received a buy rating with a target price of Rs 2,100 per share, suggesting a 19% upside. The firm showed robust disbursement growth in September, capturing market share across various auto segments and expanding its non-vehicle loan portfolio. Cholamandalam’s management reaffirmed their guidance for asset under management (AUM) growth between 22% and 23% for fiscal year 2027, with credit costs forecasted at 1.5% of average assets. Approximately 25% of its liabilities are linked to repo rates, and 50% carry floating interest, implying some sensitivity to rate hikes. However, NIMs are expected to remain steady compared to the previous fiscal year.

Shriram Finance also earned a buy recommendation with a target price of Rs 1,210, projecting a potential 20% rise. The company has maintained consistent disbursement momentum and anticipates AUM growth of around 17% in FY27, accelerating to 18-20% in the following years. An increasing share of new vehicle loans with longer tenors is expected to reduce loan rundown rates, supporting vehicle loan growth and an uptick in MSME lending in the latter half of the fiscal year. Shriram Finance expects a slight quarterly decline in CoF, which could help expand NIMs, while credit costs are predicted to hold steady at about 2% over the next two to three years.

Can Fin Homes was noted for its recent price decline but remains a buy with a target of Rs 1,075, indicating a 40% upside. Although the stock has experienced short-term setbacks, its five-year return stands at 15%, showing longer-term gains.

Aptus Value Housing Finance leads the list with the highest projected upside of 48%, priced at a target of Rs 350. Jefferies highlighted Aptus’s strong profitability metrics, forecasting a return on assets (ROA) of 7.6% in FY27 and 7.3% in FY28, alongside a core return on equity (ROE) remaining around 20% through FY28.

Other notable mentions include Home First Finance, with a 17% upside target of Rs 1,470, and Aavas Financiers, projected to climb 36% to Rs 1,800. Aavas expects AUM growth to improve markedly, supported by branch expansion and pricing discipline, despite near-term pressure on spreads.

Bajaj Finance stands out with a 25% potential increase, targeting Rs 1,280 per share. The company’s leadership expressed optimism about sustaining growth and profitability, planning to grow AUM at a compound annual growth rate (CAGR) of 23% over the next decade while focusing on artificial intelligence integration. Leadership succession is also underway, with an internal candidate expected to be announced by early 2028.

Manappuram Finance and HDB Financial Services also received buy ratings, with upside projections of 36% and 29%, respectively. Both companies show solid performance metrics, with HDB expecting to maintain NIMs above 8% and gradually improve return on assets.

Poonawalla Fincorp and Aditya Birla Capital rounded out the list, with 19% and 18% potential gains, respectively. Poonawalla Fincorp anticipates rapid AUM growth driven by expansion in gold loans and consumer products, alongside improving margins and credit cost management. Aditya Birla Capital expects a 25% CAGR in AUM growth through FY29, with a rising share of unsecured loans and benefits from a predominantly floating rate loan book.

This comprehensive sector outlook from Jefferies provides investors with a range of NBFC options that show promising growth while maintaining controlled risk profiles amid evolving market conditions. The brokerage’s assessments reflect broader trends in India’s financial services industry, where NBFCs play a crucial role in credit distribution, particularly in underserved segments such as affordable housing, MSMEs, and consumer financing.

Disclaimer: This article was authored by Debaroti Adhikary, who is not a SEBI-registered analyst or investment adviser. Neither Debaroti Adhikary nor related persons hold financial interests in the mentioned companies at the time of publication. The views are those of the respective SEBI-registered analysts and brokerages cited and do not represent the opinions of The Economic Times Digital or the journalist. Readers should refer to original sources before making investment decisions.