NBFC-MFI stocks have witnessed a meaningful run over the last 15-18 months — on the back of strong revival in growth and marked improvement in asset quality post the sharp deterioration witnessed in Covid. Removal of 10% cap on NIMs for NBFC-MFIs has further aided NIM and return ratios. The obvious question for investors is what next for the MFI stocks. Should they hold or are these stocks at peak prices? While we have seen a sharp re-rating of these stocks and near-term consolidation is possible, we think growth outlook is strong over next 5 years and that will drive stock returns. The next leg of growth will be aided by increasing penetration levels for NBFC-MFIs and bank MFIs diversify their loan books further leading in rising market shares for NBFC-MFIs. Most NBFC-MFIs could grow at +20% CAGR over the next 5 years with return profiles improving.