Auto finance non-banking financial companies (NBFCs) posted a 20.7 per cent year-on-year increase in disbursements to ₹1.04 lakh crore during the first quarter of fiscal year 2027, according to a report by Centrum. Despite the strong annual growth, disbursements declined 4.6 per cent quarter-on-quarter as commercial vehicle volumes normalized following heavy pre-buying in Q4FY26. Sector assets under management (AUM) expanded by approximately 17 per cent year-on-year.
The report highlighted a shift in the sector's growth dynamics, moving away from a strictly commercial vehicle-led surge toward a broader, more diversified expansion phase. Disbursement growth was supported by tailwinds from GST rate cuts and steady demand for passenger vehicles and tractors. Meanwhile, commercial vehicle financing cooled sequentially across nearly all major lenders as fleet operators and original equipment manufacturers digested previous inventory ahead of expected festive-season restocking later in the fiscal year.
Sequential drops in commercial vehicle disbursements were recorded across major industry players. Cholamandalam saw a 14.7 per cent decrease, Shriram Finance declined 13.8 per cent, Mahindra Finance contracted 24.9 per cent, and Sundaram Finance dropped 3.5 per cent. Notably, Sundaram Finance was the only major lender to record positive overall quarter-on-quarter disbursement growth, rising 11.1 per cent on the strength of its retail franchise.
In response to cyclical fluctuations, lenders continued to expand their non-commercial vehicle segments. Cholamandalam's non-vehicle mix crossed 40 per cent of total disbursements, while Shriram Finance reported a 25 per cent year-on-year increase in its non-CV vehicle finance segment. The Centrum report noted that segments such as SME and loan against property (LAP), gold loans, construction equipment, personal loans, and home loans are gaining share across balance sheets as part of a strategy to reduce dependency on vehicle cycles.
On the financial front, the sector delivered strong earnings for the quarter. Pre-provision operating profit (PPOP) climbed 35.7 per cent year-on-year to ₹11,771 crore, while profit after tax (PAT) surged 53.4 per cent to approximately ₹6,519 crore. Asset quality remained stable annually despite a seasonal monsoon impact, though Stage 2 and Stage 3 assets experienced sequential increases across lenders. Management teams across the sector maintain growth guidance for FY27, targeting mid-teen to low-20s AUM growth through market share gains and continued product diversification.
"The Q1FY27 performance of auto NBFCs highlights a critical lesson in financial risk management: cyclical diversification. While commercial vehicle financing experienced a predictable seasonal cool-down after heavy pre-buying, lenders with balanced portfolios in retail, SME loans, and gold financing successfully cushioned their earnings. For growing businesses and financial institutions alike, reducing single-sector dependence is essential for maintaining robust profitability and stable asset quality through market fluctuations." — Dr. Shishir Gupta, Founder & CEO, StartupLanes
