Tata Capital carries the highest upside among the three, with a target price of Rs 400, suggesting a 26% potential gain. For L&T Finance, the brokerage has set a target price of Rs 325, indicating a possible upside of 20%. Analysts have assigned Piramal Finance a target price of Rs 2,150, implying a potential upside of 21%.
The brokerage expects NBFCs to continue expanding faster than banks over the next 15 years, with their share in system credit likely to rise to around 33% by FY41. This outlook is supported by large credit gaps in the MSME segment, where bank lending accounts for only 7% to 8% of total credit, along with the presence of a sizable unorganised sector in India that remains underserved by traditional banking channels.
Investment in and development of AI engines across the sector is increasing and could potentially drive structural transformations in lending processes. “We note that AI can help NBFCs identify potential prime customers and bring about more efficiency in high-intensity product segments at a transformative pace. However, we raise caution around the regulatory gap on the matter,” the brokerage said in a note earlier today.
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The ability of AI engines to analyse alternative data sources is making customers with a strong digital footprint, such as frequent online shoppers and users with high UPI transaction activity, an attractive segment for NBFCs. In addition, high-volume lending segments like microfinance, two-wheeler financing, and personal or business loans could see significant efficiency gains from AI-driven innovations.
It also added that the Indian NBFC sector is set to witness a steep rise in competition, as many lenders are now focused on expansion into new products and markets.
Brokerage view
Tata Capital, promoted by the Tata Group, is the third-largest non-banking financial company in India with assets under management of about Rs 2.6 crore as of December 2025, according to CRISIL. The company has a well-diversified loan book, with 60% exposure to retail lending and 40% to SME and corporate loans. Within the retail segment, mortgages form the largest share, primarily through its housing finance subsidiary.
Nomura expects Tata Capital’s return on assets to improve over the next three years, supported by lower credit costs in its motor and business loan segments, operating leverage and expansion into new, higher-yielding products. The brokerage estimates the company could deliver return on equity of more than mid-teens by FY28 and loan growth at a CAGR of about 23% between FY26 and FY28. Nomura noted that the scale-up of new products will be a key factor for investors to track.
L&T Finance has, over the past few years, developed AI-driven engines to strengthen underwriting and portfolio monitoring. Retail loans now account for 98% of the portfolio, with the segment delivering a 28% CAGR between FY22 and FY25. The company has already achieved two of the four targets it had set under its transformation plan. Going ahead, consistent profitability, improved asset quality and expansion in return on assets will be key metrics to track.
Piramal Finance, with an AUM of Rs 96,700 crore, is an upper-layer NBFC. Nomura says the company has rapidly evolved over the years and has also built an impressive AI stack across the customer lifecycle. Today, over 82% of its loan mix is in the retail segment. “We expect the company to achieve around 12% ROEs by FY28F with an AUM CAGR of 26% over FY26-28F. We expect a mid-teens ROE profile over the medium term. Stable credit costs are a key deliverable from Piramal’s management,” it added.
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On the flipside, the brokerage has dished out a Neutral rating on HDB Financial Services. With a target price of Rs 760, analysts forecast an upside potential of 13% from current levels. It said that HDB has a healthy market share in legacy products such as asset financing. And, now it is rapidly expanding into new products such as consumer durable loans, gold loans, and micro finance. However, loan growth momentum has lagged peers, adding that a pick-up in growth is critical for the stock to re-rate.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)