New Delhi [India], November 13 : The Auto NBFC space witnessed a gradual improvement in disbursement momentum in the second quarter of FY26 after a relatively soft first quarter, according to a report by Centrum.
However, the pace of growth across players remains mixed, with lenders having a diversified portfolio gaining a clear advantage over pure-play vehicle financiers.
It stated, "Diversification and non-vehicle lending are becoming central growth pivots, while CV demand revival and rural recovery will determine near-term performance in 2HFY26."
The report highlighted that diversification and non-vehicle lending have become central growth pivots for auto financiers. The performance of the sector in the second half of FY26 will largely depend on the revival of commercial vehicle (CV) demand and rural recovery.
It noted that during the quarter, the sector saw mild normalization in the CV segment and stable traction in passenger vehicle (PV) and pre-owned vehicle segments.
At the same time, newer product categories such as SME loans, consumer equipment (CE), personal loans (PL), and home loans (HL) contributed more meaningfully to overall diversification.
Among the leading players, the report stated that Sundaram Finance stood out as the strongest performer, posting 18.3 per cent year-on-year (YoY) and 11 per cent quarter-on-quarter (QoQ) growth in Q2FY26.
This growth was primarily supported by healthy retail and SME momentum, with the share of these segments rising from 17.4 per cent in Q2FY25 to 19.9 per cent in Q2FY26.
Shriram Finance reported a 7.6 per cent YoY growth, moderating from 15.5 per cent a year ago, indicating some normalization after a high base. However, the company showed a sequential improvement of 2.9 per cent QoQ after a weak first quarter of FY26.
Cholamandalam Investment and Finance Company (Chola) recorded a notably muted performance, with just 0.5 per cent YoY and 0.5 per cent QoQ growth, reflecting the impact of portfolio rebalancing in non-vehicle segments.
Meanwhile, Mahindra & Mahindra Financial Services (MMFSL) remained subdued with 2.7 per cent YoY and 5.5 per cent QoQ growth. However, a sequential recovery was visible after a sharp 17.5 per cent decline in Q1FY26, supported by SME lending and a pre-festive pick-up in rural demand.
Interestingly, despite muted disbursements, Chola led the pack in terms of YoY AUM growth at 21 per cent, reflecting the strength of its diversified portfolio.
The report concluded that while traditional vehicle financing continues to face cyclical challenges, lenders with a broader mix of products are better positioned to sustain growth. The ongoing diversification into non-vehicle segments such as SME, personal, and home loans is expected to remain a key growth driver for auto NBFCs in the coming quarters.
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