Fitch: Outlook stable for Indian non-bank financial sector

Fitch Ratings said the outlook for the major Indian non-bank financial sector in 2012 is stable.

The companies included in the report are Shriram Transport Finance Co. Ltd. (Fitch AA(ind)/ stable), Mahindra & Mahindra Financial Services Ltd. (Fitch AA+(ind)/stable), Sundaram Finance Ltd. (Fitch AA+(ind)/stable), Cholamandalam Investment and Finance Co. Ltd. (Fitch AA-(ind)/stable), SREI Equipment Finance Pvt. Ltd. (Fitch AA(ind)/negative), Religare Finvest Ltd. (Fitch AA-(ind)/negative), Shriram City Union Finance Ltd. (Fitch AA-(ind)/stable) and SREI Infrastructure Finance Ltd. (Fitch AA-(ind)/negative).

Fitch believes the high pre-provision profits at most of the nine companies will absorb the cyclical impact of the moderating economic growth in 2012, although profitability will drop due to an expected increase in credit and funding costs.

However, the agency remains cautious on the medium-term outlook of the sector in view of challenges in raising cost-effective funding that may squeeze margins, impair growth prospects and increase the costs of raising fresh capital.

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