New Delhi, Aug. 28 -- Non-banking financial companies (NBFCs) are entering a new cyclical recovery, with improving loan growth, asset quality and profitability expected to drive a broad-based earnings upgrade, Motilal Oswal Financial Services said in a report.

The brokerage expects profit after tax (PAT) for its NBFC coverage universe to grow 24 per cent in FY27 and 18 per cent in FY28, as the first-quarter earnings season validated a recovery that is increasingly being supported by multiple factors rather than only lower credit costs.

"The 1QFY27 earnings season has strongly validated our thesis that NBFCs are entering a new cyclical recovery," the report said, adding that operating performance has improved through healthy loan growth,...