Credit quality surges while profitability lags; ₹450Cr PAT target looks strained

Q1 disbursements ₹1,235 Cr vs ₹858 Cr YoY = 44% growth; July trend described as good

CIBIL >725: 63% (FY24) → 84% (Q1 FY27); early delinquency 5.55% → 2.29%; new to credit 13% → 4%

80% of NPAs from old book (pre-Jan 2025); 70% of new NPA additions from old book; new book delinquency 60–65% lower

PAT ₹11.5 Cr this quarter; FY29 target ₹450–500 Cr (39–44x current); mechanism stated but not yet evidenced

Revenue ₹363.9 Cr (5.9% YoY); NII ₹219 Cr (39% YoY); but revenue growth lags disbursement growth (44%), implying portfolio runoff outpaces new originations

CIBIL >725 jumped from 63% (FY24) to 84% (Q1 FY27); early delinquency halved from 5.55% to 2.29%; new-to-credit exposure dropped 13% → 4%. Reflects tighter underwriting discipline since Jan 2025.

Guided that old-book NPA runoff (80% of NPA stock) will drive credit cost down in 'next 2–3 quarters.' Data supports runoff pace (new book 68% → 85% target), but credit cost timing is conditional.

AUM ₹217 Cr (3x YoY); disbursements ₹50 Cr (85% YoY); yields 21.4% with 99.7% current-portfolio quality. Launches in UP/Bihar imminent; remain on track to double AUM in FY27.

35% CAGR disbursement guidance maintained and beaten (44% in Q1). But explicit PAT ₹450–500 Cr target (from prior calls) not re-affirmed; tone suggests confidence, but delivery of ₹11.5 Cr this quarter makes path appear strained.

Targeting Micro LAP 15–20% of AUM mix over 3–5 years. Early portfolio quality strong; good early trend supports expansion. Accelerate if momentum continues.

Tightened since Jan 2025 yet grew 40% YoY; market is large enough. No impact on growth despite tightening. Will prioritize underwriting discipline over market share.

Q1, Q2 typically softer. Old book running off; month-on-month improvement over 12 months. New book 80–85% by Q4 FY27 will drive reversion. July trending good.

Conscious strategy: higher ticket size drives AUM growth with minimal yield drop (yielding 20%+). Stabilize around ₹10 Lakh. Tier 3–6 towns have low competition; no near-term disruption expected.

Disbursement yield holding at 17.2–17.4% (improved). P&L yield 16.5% is mathematical (liquidity buffer denominator effect). Yield hold ~17% range; cost of borrowing declining. Will reprice debt at lower rates.

No structural constraints. Tightened policy Jan onwards; dip in disbursements. Rebuilding now; AUM will accelerate as disbursements increase. Direct assignments/asset sales muted growth temporarily.

35% CAGR disbursement growth target (given last quarter). Started well, Q1 at 44% vs. 35% target. Q2 also looks good. Created buffer for guidance.

Key drivers: field sales force +30% (target +50% by Mar-27); branch addition; productivity gains (turnaround TAT -44% in 1 yr). Passenger car very strong, now exceeds M&HCV volumes. Aiming well-diversified portfolio across 5 segments.

Write-off ₹62 Cr (Q1 FY27) vs. ₹7.5 Cr (Q4 FY26). ₹250 Cr high-cost borrowing (13%) due in Q2. This is last tranche; cost converge to 9% by Mar-27.

Old book running off; contribution to NPA/credit cost reducing each quarter at good pace. New book 60% → 68% → 85% by Q4. 90+ DPD on recent cohort 60–65% less. Expect meaningful GNPA/credit cost improvement next 2–3 quarters.

Historically South strongest. North, East, West weaker (pre-Jan-2025). Post-tightening, region-specific actions (e.g., Madhya Pradesh, Uttar Pradesh, Punjab, Haryana tightened). Now much more uniform. Scorecard implementation driving uniformity.

Most stress from old book. On new books largely okay except pockets: Bihar, parts of Jharkhand, Maharashtra, Rajasthan. Early warning framework tracks delinquency/roll-forward; tightens region-specific filters if weakness emerges.

July trend described as good. Q2 expected 35%+ growth. Sales force expansion, branch addition, and productivity improvements concrete; on track.

Cost of funds down 80 bps YoY; ₹250 Cr high-cost debt (13%) repaying in Q2 will lower overall cost. Liquidity buffer ₹529 Cr added ₹8 Cr negative carry, temporary.

80% of NPA from old book; new book 60% → 68% → 85% by Q4 FY27. Mechanism sound but timing dependent on portfolio mix, macro stability, and execution.

Management projects significant credit cost reduction in next 2–3 quarters as old book runs off (80% of NPA stock). If runoff pace is slower or new book delinquencies rise unexpectedly, credit cost will not decline as guided, jeopardizing ₹450–500 Cr PAT target.

PAT ₹11.5 Cr this quarter; FY29 target ₹450–500 Cr (39–44x multiple) requires near-perfect execution: old book runoff, credit cost drop to 1–1.5%, AUM re-acceleration, and cost control. Even 40% PAT CAGR reaches only ~₹200 Cr by FY29. Guidance appears aspirational.

Analyst flagged collection efficiency dipped this quarter to 95% while peers reported holding up well in May/June. Management attributed to Q1/Q2 seasonal softness and old book drag. If dip signals new-book quality deterioration or geographic stress (especially Bihar, Jharkhand, Maharashtra, Rajasthan pockets), credit cost decline may be delayed.

Disbursements +44% YoY but AUM +6% YoY and +2% QoQ. Vehicle finance tenors ~3–3.5 years mean portfolio naturally runs off. If AUM growth lags, path to ₹450–500 Cr PAT is constrained (PAT scales with AUM). New product mix (Micro LAP, 6–7 yr tenor) helps but still 97% of AUM in VF.

Analyst flagged large players entering Micro LAP ₹8–10 Lakh ticket range. Management claims Tier 3–6 geographic focus and 20%+ yields mitigate pressure. However, if competition intensifies and yields compress, AUM growth target (double in FY27) may require lower profitability per loan.

Management acknowledged El Nino impact on kharif sowing/reservoir levels, rural demand risk, and global conflicts. While underlying demand described as resilient, slowing growth or unexpected rate hikes could pressure collections on fresh originations (especially M&HCV, which saw delays).