Why Should You Invest in a Non-Banking Financial Company (NBFC)?

“Money is a terrible master, but an excellent servant.” – P.T. Barnum

Money management is all about creating a balanced portfolio that suits your resources, options, and risk appetite. While low-risk investments guarantee modest returns, a calculated risk often leads to significant rewards. One investment avenue gaining traction in India is non-banking financial companies (NBFCs). Despite the challenges faced during the IL&FS crisis, NBFCs remain a promising option when chosen wisely. Here’s why investing in NBFCs is worth considering:

1. Contributing to Nation Building

NBFCs play a crucial role in economic development by:

Providing access to credit for underserved segments, including rural areas and MSMEs.
Driving GDP growth through capital formation.
MSMEs alone contribute to over 29% of India’s GDP, and NBFCs help fuel this growth by offering tailored financial solutions.

2. Opportunity in Falling Stock Prices

The 2018 liquidity crisis caused a dip in NBFC stock prices, creating a buy-low opportunity for investors. While some institutions faced credit risks, financially sound NBFCs have remained resilient, presenting long-term growth potential.

3. Government Support

The Union Budget 2019-20 introduced measures to bolster NBFCs:

A one-time partial credit guarantee for public sector banks to buy high-rated pooled assets from NBFCs.
₹70,000 crores in liquidity support for banks, indirectly benefiting NBFCs.
This backing ensures financial stability and encourages investor confidence.

4. Balanced Risk-Return Relationship

Investing in NBFCs involves calculated risks. Key aspects to assess include:

The company's credit rating and financial health.
The sectoral impact of government initiatives. NBFCs, with their track record of performance, present a solid case for potential long-term returns.

5. The Role of FinTech

Technology has reshaped the NBFC landscape by enabling:

Personalized offerings: Data-driven insights help NBFCs cater to diverse customer needs.
Automation: Streamlined operations reduce costs and enhance productivity.
Increased transparency: Investors gain better visibility into the company’s processes and financial health.

The Capri Global Advantage

Capri Global, a diversified NBFC, exemplifies why NBFCs are an excellent investment option:

Focused on high-growth segments like MSMEs, construction finance, and affordable housing.
Leveraging automation for cost control and improved efficiency.
Operating across 88 locations with a team of 1,800 employees, ensuring robust service delivery.

Final Thought
NBFCs are a key player in India’s financial ecosystem, offering a mix of stability, growth, and innovation. By carefully analyzing an NBFC’s financial strength, market presence, and future potential, investors can unlock significant value and contribute to the nation’s economic progress.

Invest in a Non-banking Financial Company

Invest in a Non-banking Financial Company