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Earnings Profile- Operating profits to witness contraction<br />
Confluence of factors could impact earnings of NBFCs in the current fiscal-<br />
Increase in the cost of funds (COF)<br />
Considering a managed leverage of 5.5-6 times; Weighted average cost of funds to increase by 45-50 bps in FY2019<br />
Slowdown in growth would impact operating efficiencies<br />
Every 1% decline in portfolio growth (from 19-20%) would impact operating efficiency by about 2-3 bps ; expect 5-10 bps impact<br />
Carrying cost of additional liquidity buffer<br />
ICRA expects entities to hold incremental buffer of about 2-3% of the total assets; thus, impact could be about 5-15 bps on<br />
NIMs depending on the NBFC current business yield<br />
* net of pass on of 50% of the borrowing cost increase<br />
Impact on operating profit estimated at 30-50 bps *<br />
Expected Stress on asset quality<br />
Stress expected in vehicle finance and SME credit segments because of the increase in fuel costs and expected slowdown in<br />
meeting incremental financing in case of SMEs
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