{"id":220760,"date":"2026-08-27T11:35:53","date_gmt":"2026-08-27T06:05:53","guid":{"rendered":"https:\/\/univest.in\/blogs-2\/?p=220760"},"modified":"2026-08-27T11:35:55","modified_gmt":"2026-08-27T06:05:55","slug":"nbfc-stocks-below-fair-value","status":"publish","type":"post","link":"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/","title":{"rendered":"3 Undervalued NBFC Stocks Trading Below Fair Value"},"content":{"rendered":"<div class=\"meta-block\"><\/div>\n<p style=\"border-left: 4px solid #1F4E79; background: #EBF3FB; padding: 10px 16px; font-style: italic;\"><em>NBFC sector PE near 19.8. Muthoot Finance trades at 11.2x. IIFL Finance at 12.3x. M&amp;M Financial Services at 16.4x. All post strong ROE.<\/em><\/p>\n<div style=\"background: #F0F9FF; border-left: 4px solid #2E7D32; border-radius: 6px; padding: 14px 18px; margin: 18px 0;\">\n<p style=\"margin: 0; color: #1f4e79; font-size: 14px;\"><strong>Quick Answer<\/strong><\/p>\n<p style=\"margin: 8px 0 0;\">Three NBFC stocks, Muthoot Finance, IIFL Finance and Mahindra and Mahindra Financial Services, are trading below the sector&#8217;s average price to earnings ratio of close to 19.8 times while each posts healthy return on equity. Muthoot Finance stands out with the highest return on equity of the group from its gold loan business, while IIFL Finance and Mahindra Finance operate more diversified lending books. This gap between valuation and profitability is why these NBFC stocks stand out on a simple sector screen, though a formal buy rating needs deeper company specific research.<\/p>\n<\/div>\n<p>India&#8217;s non banking finance companies have navigated a tighter credit cycle over the past two years, with regulatory changes and funding cost pressures affecting different lenders unevenly depending on their loan book mix. Not every stock in the space carries the same multiple. A screen of listed NBFC stocks against the sector&#8217;s average price to earnings ratio surfaces three names still priced below that benchmark.<\/p>\n<p>Muthoot Finance, IIFL Finance and Mahindra and Mahindra Financial Services all currently trade below the broader NBFC industry PE, despite delivering healthy return on equity. This piece breaks down why each stock screens as undervalued, what the underlying financials show, and the risks that come with owning non banking lenders.<\/p>\n<p style=\"margin-top: 24px;\"><strong><a href=\"https:\/\/univest.in\/user\/log-in?utm_source=blogs&amp;utm_medium=undervalued_nbfc_articles\">Click Here &#8211; Get Free Investment Predictions<\/a><\/strong><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Why_These_NBFC_Stocks_Screen_as_Undervalued\" title=\"Why These NBFC Stocks Screen as Undervalued\">Why These NBFC Stocks Screen as Undervalued<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Muthoot_Finance_Highest_ROE_From_Gold_Loans\" title=\"Muthoot Finance: Highest ROE From Gold Loans\">Muthoot Finance: Highest ROE From Gold Loans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#IIFL_Finance_Diversified_Retail_Lending_at_a_Discount\" title=\"IIFL Finance: Diversified Retail Lending at a Discount\">IIFL Finance: Diversified Retail Lending at a Discount<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Mahindra_Finance_Rural_and_Vehicle_Financing_Focus\" title=\"Mahindra Finance: Rural and Vehicle Financing Focus\">Mahindra Finance: Rural and Vehicle Financing Focus<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Valuation_Snapshot_PE_PB_and_Dividend_Yield\" title=\"Valuation Snapshot: PE, PB and Dividend Yield\">Valuation Snapshot: PE, PB and Dividend Yield<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Risks_to_Consider_Before_Buying_These_NBFC_Stocks\" title=\"Risks to Consider Before Buying These NBFC Stocks\">Risks to Consider Before Buying These NBFC Stocks<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Asset_Quality_and_Credit_Cost_Risk\" title=\"Asset Quality and Credit Cost Risk\">Asset Quality and Credit Cost Risk<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Funding_Cost_and_Liquidity_Risk\" title=\"Funding Cost and Liquidity Risk\">Funding Cost and Liquidity Risk<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Gold_Price_Volatility_for_Gold_Loan_Lenders\" title=\"Gold Price Volatility for Gold Loan Lenders\">Gold Price Volatility for Gold Loan Lenders<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Regulatory_Change_Risk\" title=\"Regulatory Change Risk\">Regulatory Change Risk<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#How_to_Track_These_NBFC_Stocks\" title=\"How to Track These NBFC Stocks\">How to Track These NBFC Stocks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#FAQs_on_Undervalued_NBFC_Stocks\" title=\"FAQs on Undervalued NBFC Stocks\">FAQs on Undervalued NBFC Stocks<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Which_NBFC_stocks_are_trading_below_the_sector_average_PE\" title=\"Which NBFC stocks are trading below the sector average PE?\">Which NBFC stocks are trading below the sector average PE?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Is_Muthoot_Finance_undervalued_compared_to_its_sector\" title=\"Is Muthoot Finance undervalued compared to its sector?\">Is Muthoot Finance undervalued compared to its sector?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Why_does_Mahindra_Finance_trade_closer_to_the_sector_average_PE\" title=\"Why does Mahindra Finance trade closer to the sector average PE?\">Why does Mahindra Finance trade closer to the sector average PE?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#What_is_the_market_capitalisation_of_IIFL_Finance\" title=\"What is the market capitalisation of IIFL Finance?\">What is the market capitalisation of IIFL Finance?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Why_do_these_NBFC_stocks_carry_high_debt_to_equity_ratios\" title=\"Why do these NBFC stocks carry high debt to equity ratios?\">Why do these NBFC stocks carry high debt to equity ratios?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#What_are_the_main_risks_in_undervalued_NBFC_stocks\" title=\"What are the main risks in undervalued NBFC stocks?\">What are the main risks in undervalued NBFC stocks?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/univest.in\/blogs-2\/nbfc-stocks-below-fair-value\/#Is_a_low_PE_enough_reason_to_buy_an_NBFC_stock\" title=\"Is a low PE enough reason to buy an NBFC stock?\">Is a low PE enough reason to buy an NBFC stock?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Why_These_NBFC_Stocks_Screen_as_Undervalued\"><\/span><strong>Why These NBFC Stocks Screen as Undervalued<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The NBFC industry currently carries an average price to earnings ratio of close to 19.8 times trailing earnings across listed non banking lenders in this classification. A stock trading meaningfully below that average, while still posting healthy return on equity, is a reasonable starting point for a relative valuation screen.<\/p>\n<p>All three companies below clear that bar, with Muthoot Finance standing out for a return on equity well above the other two, a combination not always available among NBFC stocks priced at a discount to the sector multiple.<\/p>\n<p>The table below lists these three companies alongside their current price, valuation multiple and return ratios.<\/p>\n<table style=\"border-collapse: collapse; width: 100%;\" border=\"1\" cellspacing=\"0\" cellpadding=\"6\">\n<thead>\n<tr>\n<th>Company<\/th>\n<th>NSE Ticker<\/th>\n<th>CMP (Rs)<\/th>\n<th>PE Ratio<\/th>\n<th>Sector PE<\/th>\n<th>ROE<\/th>\n<th>Market Cap (Rs Cr)<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Muthoot Finance<\/td>\n<td>MUTHOOTFIN<\/td>\n<td>3,127.20<\/td>\n<td>11.22<\/td>\n<td>19.83<\/td>\n<td>28.01%<\/td>\n<td>1,28,550<\/td>\n<\/tr>\n<tr>\n<td>IIFL Finance<\/td>\n<td>IIFL<\/td>\n<td>645.90<\/td>\n<td>12.33<\/td>\n<td>19.83<\/td>\n<td>11.93%<\/td>\n<td>27,822<\/td>\n<\/tr>\n<tr>\n<td>Mahindra and Mahindra Financial Services<\/td>\n<td>M&amp;MFIN<\/td>\n<td>384.55<\/td>\n<td>16.43<\/td>\n<td>19.83<\/td>\n<td>10.72%<\/td>\n<td>53,542<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span class=\"ez-toc-section\" id=\"Muthoot_Finance_Highest_ROE_From_Gold_Loans\"><\/span><strong>Muthoot Finance: Highest ROE From Gold Loans<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Muthoot Finance is India&#8217;s largest gold loan financier, lending against pledged gold jewellery through a nationwide branch network. The stock trades at a price to earnings ratio of 11.22, well below the sector average of 19.83, at a current price of around Rs 3,127.<\/p>\n<p>Return on equity of 28.01 percent is by far the highest of the three NBFC stocks in this list, reflecting the strong economics of the gold loan business. On an EPS of Rs 285.39 and book value of Rs 1,011.33, the price to book multiple works out to 3.17, alongside a dividend yield of 0.94 percent.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"IIFL_Finance_Diversified_Retail_Lending_at_a_Discount\"><\/span><strong>IIFL Finance: Diversified Retail Lending at a Discount<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>IIFL Finance operates a diversified lending book spanning home loans, gold loans, business loans and microfinance. Its price to earnings ratio of 12.33 sits below the sector average of 19.83, at a current share price of around Rs 646.<\/p>\n<p>Return on equity of 11.93 percent is more modest than Muthoot Finance, reflecting the different risk and margin profile of a diversified retail lender. On an EPS of Rs 53.03 and book value of Rs 327.24, the price to book multiple works out to 2.00, the lowest of the three.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Mahindra_Finance_Rural_and_Vehicle_Financing_Focus\"><\/span><strong>Mahindra Finance: Rural and Vehicle Financing Focus<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Mahindra and Mahindra Financial Services provides vehicle and rural asset financing, with a customer base concentrated in semi urban and rural India. The stock trades at 16.43 times trailing earnings, the narrowest discount to the sector average of 19.83 among these three NBFC stocks, at a current price of around Rs 385.<\/p>\n<p>Return on equity of 10.72 percent is the lowest of the group, and the company pays the highest dividend yield of the three at 1.95 percent. On an EPS of Rs 23.45 and book value of Rs 191.65, the price to book multiple works out to 2.01.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Valuation_Snapshot_PE_PB_and_Dividend_Yield\"><\/span><strong>Valuation Snapshot: PE, PB and Dividend Yield<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Beyond the headline price to earnings ratio, book value multiples and dividend yield round out the valuation picture for these three companies. All three carry high debt to equity ratios, which is a structural feature of the lending business model rather than a sign of financial distress, since NBFCs borrow to on-lend to customers.<\/p>\n<table style=\"border-collapse: collapse; width: 100%;\" border=\"1\" cellspacing=\"0\" cellpadding=\"6\">\n<thead>\n<tr>\n<th>Company<\/th>\n<th>Price to Book<\/th>\n<th>Book Value (Rs)<\/th>\n<th>Dividend Yield<\/th>\n<th>Debt to Equity<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Muthoot Finance<\/td>\n<td>3.17<\/td>\n<td>1,011.33<\/td>\n<td>0.94%<\/td>\n<td>4.02<\/td>\n<\/tr>\n<tr>\n<td>IIFL Finance<\/td>\n<td>2.00<\/td>\n<td>327.24<\/td>\n<td>0.61%<\/td>\n<td>5.01<\/td>\n<\/tr>\n<tr>\n<td>Mahindra and Mahindra Financial Services<\/td>\n<td>2.01<\/td>\n<td>191.65<\/td>\n<td>1.95%<\/td>\n<td>4.82<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Muthoot Finance commands the richest price to book multiple of the three, reflecting its superior return on equity and the collateral backed nature of gold loans. IIFL Finance and Mahindra Finance trade at similar book value multiples despite different loan book compositions.<\/p>\n<p style=\"margin-top: 24px;\"><strong><a href=\"https:\/\/univest.in\/screeners\">Check Live PE, PB and ROE Data on the Univest Screener<\/a><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Risks_to_Consider_Before_Buying_These_NBFC_Stocks\"><\/span><strong>Risks to Consider Before Buying These NBFC Stocks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>A discount to the sector average price to earnings ratio does not remove company specific risk for NBFC stocks exposed to credit cycles and funding costs.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Asset_Quality_and_Credit_Cost_Risk\"><\/span><strong>Asset Quality and Credit Cost Risk<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A slowdown in the broader economy or a specific customer segment can push up non performing loans and provisioning requirements, directly hitting profitability for non banking lenders.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Funding_Cost_and_Liquidity_Risk\"><\/span><strong>Funding Cost and Liquidity Risk<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>NBFCs rely on wholesale borrowing and bank lines to fund their loan books, and tighter liquidity conditions or rising interest rates can compress net interest margins.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Gold_Price_Volatility_for_Gold_Loan_Lenders\"><\/span><strong>Gold Price Volatility for Gold Loan Lenders<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>For gold loan focused NBFCs such as Muthoot Finance, a sharp decline in gold prices can reduce collateral values and affect loan growth and recovery dynamics.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Regulatory_Change_Risk\"><\/span><strong>Regulatory Change Risk<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Changes in regulatory capital requirements, provisioning norms or lending guidelines from the Reserve Bank of India can affect growth and profitability across the NBFC sector with limited advance notice.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_Track_These_NBFC_Stocks\"><\/span><strong>How to Track These NBFC Stocks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Investors evaluating these three names should track quarterly assets under management growth, asset quality trends, and how the sector average PE moves relative to each company&#8217;s own multiple over time, rather than relying on the valuation gap in isolation among NBFC stocks. Comparing these numbers regularly is the most reliable way to judge whether the discount to fair value remains intact or has already closed.<\/p>\n<p style=\"margin-top: 24px;\"><em>Download the <a href=\"http:\/\/apps.apple.com\/in\/app\/univest-stocks-investment\/id6443753518\" rel=\"nofollow noopener\" target=\"_blank\">Univest iOS App<\/a> or <a href=\"http:\/\/play.google.com\/store\/apps\/details?id=com.univest.capp&amp;hl=en_IN\" rel=\"nofollow noopener\" target=\"_blank\">Univest Android App<\/a> to track Muthoot Finance, IIFL Finance and Mahindra Finance share prices live and set price alerts.<\/em><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Muthoot Finance, IIFL Finance and Mahindra and Mahindra Financial Services are the three NBFC stocks currently trading below the sector&#8217;s average price to earnings ratio of close to 19.8 times, while all three deliver healthy return on equity. That combination makes them worth a closer look for investors who already want exposure to India&#8217;s non banking credit theme, though asset quality cycles and funding cost risk mean position sizing and diversification still matter when adding these names to a portfolio.<\/p>\n<div style=\"background: #CC0000; border-radius: 8px; padding: 16px 20px; margin: 24px 0;\">\n<p style=\"color: #ffffff; font-size: 13px; line-height: 1.7; margin: 0;\"><strong style=\"color: #ffffff;\">Disclaimer:<\/strong> Data and figures in this article are sourced from publicly available information. These may or may not be accurate. Please verify all data with the official NSE (nseindia.com) and BSE (bseindia.com) websites before making any investment decision. Investments in securities are subject to market risk. This content is for educational purposes only and is not investment advice by Univest (SEBI RA INH000013776).<\/p>\n<\/div>\n<h2><span class=\"ez-toc-section\" id=\"FAQs_on_Undervalued_NBFC_Stocks\"><\/span><strong>FAQs on Undervalued NBFC Stocks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Which_NBFC_stocks_are_trading_below_the_sector_average_PE\"><\/span><strong>Which NBFC stocks are trading below the sector average PE?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans.<\/strong> Muthoot Finance, IIFL Finance and Mahindra and Mahindra Financial Services are currently trading below the NBFC sector&#8217;s average price to earnings ratio of close to 19.8 times, based on live NSE and BSE pricing.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Is_Muthoot_Finance_undervalued_compared_to_its_sector\"><\/span><strong>Is Muthoot Finance undervalued compared to its sector?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans.<\/strong> Muthoot Finance trades at a price to earnings ratio of 11.22, well below the sector average of 19.83, while delivering a return on equity of 28.01 percent, the highest among these three NBFC stocks.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Why_does_Mahindra_Finance_trade_closer_to_the_sector_average_PE\"><\/span><strong>Why does Mahindra Finance trade closer to the sector average PE?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans.<\/strong> Mahindra and Mahindra Financial Services trades at 16.43 times earnings, the narrowest discount to the sector average of 19.83 among these three names, reflecting its lower return on equity of 10.72 percent relative to Muthoot Finance and IIFL Finance.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_the_market_capitalisation_of_IIFL_Finance\"><\/span><strong>What is the market capitalisation of IIFL Finance?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans.<\/strong> IIFL Finance has a market capitalisation of around Rs 27,822 crore, with a price to earnings ratio of 12.33 against the sector average of 19.83.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Why_do_these_NBFC_stocks_carry_high_debt_to_equity_ratios\"><\/span><strong>Why do these NBFC stocks carry high debt to equity ratios?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans.<\/strong> High debt to equity ratios are a structural feature of the NBFC lending business model, since these companies borrow funds to on-lend to customers, and should be read differently from leverage at an industrial company.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_are_the_main_risks_in_undervalued_NBFC_stocks\"><\/span><strong>What are the main risks in undervalued NBFC stocks?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans.<\/strong> The main risks include asset quality deterioration during credit cycles, funding cost and liquidity pressure, gold price volatility for gold loan lenders, and regulatory changes from the Reserve Bank of India.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Is_a_low_PE_enough_reason_to_buy_an_NBFC_stock\"><\/span><strong>Is a low PE enough reason to buy an NBFC stock?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans.<\/strong> A price to earnings ratio below the sector average is a useful starting screen for NBFC stocks but not a standalone buy signal. Investors should also review asset quality, loan book diversification and funding cost trends before investing.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Muthoot Finance, IIFL Finance and Mahindra Finance trade below the NBFC sector&#8217;s average PE of near 19.8, all with healthy ROE.<\/p>\n","protected":false},"author":35,"featured_media":220759,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24],"tags":[3802],"class_list":["post-220760","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market","tag-news"],"metadata":{"rank_math_internal_links_processed":["1"],"_thumbnail_id":["220759"],"_edit_lock":["1787810757:29"],"_last_editor_used_jetpack":["block-editor"],"rank_math_primary_category":["24"],"rank_math_seo_score":["84"],"rank_math_title":["Undervalued NBFC Stocks Trading Below Fair Value"],"rank_math_description":["These NBFC stocks, Muthoot 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