9 hrs ago
UBS backs four NBFCs as personal-loan cycle strengthens
UBS believes personal loans may become a major source of growth for Indian banks and finance companies.
It says loan repayment problems are improving across unsecured lending.
UBS also expects India’s financial system to have enough extra money to support lending.
The brokerage’s four preferred non-bank finance companies are L&T Finance, Shriram Finance, Poonawalla Fincorp and Cholamandalam Investment & Finance.
UBS expects Poonawalla Fincorp to grow its loans the fastest among the companies it covers.
It upgraded L&T Finance to Buy and increased its target price.
UBS upgraded Bajaj Finance to Neutral, not Buy, because its future growth and profitability may face pressure.
The brokerage expects gold-loan growth to slow as gold prices stabilize.
It believes personal loans could then lead the next phase of unsecured-credit growth.
UBS retained Buy ratings on Shriram Finance, Poonawalla Fincorp and Cholamandalam Investment & Finance.
UBS upgraded L&T Finance to Buy and raised its target price to Rs 380 from Rs 350.
Poonawalla Fincorp has UBS’s highest estimated loan growth, at 36% in FY27 and 32% in FY28.
UBS upgraded Bajaj Finance from Sell to Neutral and raised its target price to Rs 1,100.
UBS expects improving asset quality, surplus liquidity and personal loans to support India’s next unsecured-credit growth phase.
- Who
- UBS and the Indian non-banking financial companies discussed in its September 22 report.
- What
- UBS identified four preferred NBFCs, upgraded L&T Finance to Buy and Bajaj Finance to Neutral, and outlined expectations for a recovery in unsecured lending.
- Where
- India’s banking and non-banking financial sector.
- When
- The analysis is based on a UBS Global Research report dated September 22, 2026; the cited forecasts cover FY27 and FY28.
- Why
- UBS expects improving unsecured-loan asset quality, surplus system liquidity and stronger personal-loan growth to support credit expansion.
UBS’s preferred growth case
UBS’s qualification and risk case
Preferred stocks
UBS’s preferred growth case
UBS rates L&T Finance, Shriram Finance, Poonawalla Fincorp and Cholamandalam Investment & Finance Company Buy, citing expected loan growth and improving conditions in personal loans.
UBS’s qualification and risk case
Bajaj Finance is not included among the Buy-rated names; UBS rates it Neutral despite upgrading it from Sell.
Bajaj Finance outlook
UBS’s preferred growth case
UBS expects Bajaj Finance to benefit from cyclical earnings upgrades, yield-accretive growth and stronger asset quality after credit costs declined.
UBS’s qualification and risk case
UBS says growth is increasingly driven by secured vehicles and gold loans, while vehicles have lower return on assets and maintaining roughly 4% ROA may be structurally difficult.
Unsecured-credit recovery
UBS’s preferred growth case
Improving past-due trends, surplus liquidity and stabilizing unsecured leverage support UBS’s view that personal loans can lead the next growth phase.
UBS’s qualification and risk case
UBS expects funding costs to rise by 15-20 basis points in FY27 and says gold-loan growth may moderate as gold prices stabilize, leaving the recovery dependent on personal-loan momentum.
Key facts
- Four preferred NBFCs
- L&T Finance, Cholamandalam Investment & Finance Company, Shriram Finance and Poonawalla Fincorp
- L&T Finance rating
- Upgraded from Neutral to Buy; target price raised to Rs 380 from Rs 350
- Highest forecast loan growth
- Poonawalla Fincorp: 36% in FY27 and 32% in FY28
- Bajaj Finance rating
- Upgraded from Sell to Neutral; target price raised to Rs 1,100 from Rs 910
- Bajaj asset quality
- Stage 2 and 3 urban personal loans declined to 2.8% in June 2026 from 3.2% in March 2025
- Funding-cost assumption
- UBS expects FY27 funding costs to increase by 15-20 basis points
- Unsecured leverage
- UBS said unsecured leverage rose from 6% of GDP in FY19 to 10% in FY24 and has remained broadly stable for three years
Quotes
UBS
Global brokerage and research provider covering Indian financial companies
“LTF has had strong loan growth acceleration from 14% in FY25 to 25% in FY26, with further acceleration in Q1FY27. That has been driven by a strong pick-up in personal loan growth, with a partnership model and new AI initiatives aiding overall agility across products.”
financialexpress.com
“Bajaj Finance’s growth delta is driven by secured segments, such as vehicles and gold. While gold yield is similar to the company’s other yields, vehicles have lower ROA; thus, given BAF’s size, maintaining ROA at ~4% structurally will be difficult”
financialexpress.com
Sources
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