Prefer banks to NBFCs, but will book profit in PSUs: Macquaire Capital

Ganapathy pointed out that stress is likely to manifest first among fintech companies, then extend to NBFCs, and finally impact banks with significant ties to fintech firms and their growth.

“I do not want to take specific names because we do not cover many of them, but it is through these partnerships where the NPLs will first show up and then organically into their own numbers and finally, it moves on to the large private sector banks, but we are quite a time away,” he said.

In the private sector banking segment, Ganapathy's top picks are HDFC Bank, ICICI Bank, and IndusInd Bank.

Ganapathy emphasised a selective approach when it comes to NBFCs.

Ganapathy singled out Shriram Finance, mentioning the company's strong performance and growth potential. Shriram Finance reported 18% year-on-year growth in net interest income for the September quarter.

Also Read | These are Prabhudas Lilladher's top picks among NBFCs

Macquarie has an 'outperform' rating on the stock with a target price of ₹2,350, indicating a potential upside of 30%. Macquarie expects a decline in net interest margins (NIMs) in the second half of the financial year 2024 while forecasting an overall NIM growth of 18-20% for the fiscal year. The company's credit cost guidance of 2% is anticipated to drive a 3% return on assets (RoAs) for FY24.

Many analysts recently raised their bets on the Chennai-based finance company which reported strong numbers on loan growth and margins for the September quarter of the financial year 2024.

Also Read | Deal action picking up in Fintech & SaaS spaces: Raja Lahiri, Grant Thornton Bharat

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