Loss narrowing, momentum claimed but revenue flat; recovery unproven

Revenue flat at +0.3% YoY; portfolio near-flat (write-offs offset disbursements)

Loss reduced to ₹34 Cr but company still unprofitable; CGFMU benefit ₹75 Cr (30% of improvement)

GNPA at 5.9% confirmed; fresh slippages ₹125 Cr down from ₹400 Cr YoY — strong improvement

Cost of funds 7.7% Q1 FY27 (down 40 bps YoY, 15 bps QoQ); deposit mix improving — supported

Q1 portfolio growth near-zero after write-offs; growth target relies on H2 momentum; NIM claim unvalidated

Now at 51%, up from 45% a year ago. Strategic shift to reduce unsecured concentration risk and volatility. Supported by MSME growth (₹4,482 Cr +12% YoY), housing (₹1,005 Cr +8%), business banking (40% growth).

Provides 72.75% claim coverage + zero risk weight cap (15% of portfolio). Structured as credit enhancement, reducing tail risk on new JLG/MBBL disbursements. Legacy stress from pre-Jan-25 portfolio (INR656 Cr NPA, 66% provisioned) ring-fenced.

Down 40 bps YoY, 15 bps QoQ. Deposit mix improving (CASA 22%, retail term deposits growing 15% YoY). Senior citizen deposit rates cut from 9.1% peak to 8.25%; general term rates from 8.5% to 8.1%. Further repricing benefit expected in Q2-Q3.

Post-April 25 JLG NPA 1.85-1.9% (post-guardrail book). Management guiding conservatively on upper end (3-3.5%) recognizing seasonal Q1 recovery weakness; expects normalisation as H2 matures. FY28 target 2-2.5% maintained.

Guidance held firm despite Q1 portfolio near-flat (Q4 had 30% disbursement growth; Q1 is seasonally lower). Management flagged write-offs and rundown offsetting new business; full-year 25-30% expected if H2 momentum sustains. High execution risk.

JLG to remain ~25% of portfolio over 2-3 years; 15-20% growth for JLG/MBBL; 25-30% overall growth. Not running down; growth is quality-led on existing customer base.

Credit cost 3-3.5% (conservative upper side) for rest of year. NCD ₹500 Cr Tier 2 fundraise (adds 250 bps CRAR); early redemption ₹195 Cr at 12.5% saves ₹20 Cr. No equity raise till end FY27.

99.9% existing customers with history; separate underwriting team, established business activity; CGFMU covered; dedicated collection team. Incremental growth strong after 3-4 years of learning.

MB/JLG recoveries normal; retail/secured take longer (SARFAESI process 6-7 months). Unsecured MFI INR28 Cr recoveries Q1 (out of ₹69 Cr total); collection head count 1,100 for JLG will shift to recovery post normalisation.

Consolidation model—no new products. 1,100 branches at only 70-80% productivity; untapped potential. JLG has good potential (industry down 30%; Utkarsh core geography understocked). Guarantee scheme, new underwriting standards, and stable collection team de-risk growth.

INR170 Cr (JLG+MBBL) covered under CGFMU out of INR740 Cr total MFI NPAs. Pre-April-25: ₹656 Cr NPA, ₹430 Cr provisioned (66% PCR). Post-April: ₹80 Cr NPA, ₹15 Cr provisioned. Risk weight: 15% of new disbursements zero; 85% standard weight.

Non-MFI ₹425 Cr: MSME ₹169 Cr (3.8%), CV&CE ₹62 Cr, WSL ₹30 Cr, Housing ₹49-50 Cr.

No FY27 ROA given; target 2-digit ROE by FY27 exit, 15% by FY28. PPOP ₹64 Cr (5x Q4 ₹12 Cr). Improvement visible; as AUM grows, income will accrue in normalised fashion. Cost of funds benefit ~40 bps materializing; recovery concentration ongoing.

Cost-to-income elevated because income (denominator) contracted over past year. Focus is higher income + static costs → ratio improvement as income normalizes. Disbursements, fees, other income will grow; headcount already rationalised by 1,700.

JLG/Micro Banking will remain ~25% of portfolio; will grow, not run down. Ratio will stay at 25% as secured/diversified assets grow faster.

Q1 portfolio near-flat after write-offs; Q4 had 30% disbursement growth; H2 momentum critical. Infrastructure in place; execution unproven.

1,100-branch network at 70-80% utilization; employee base rationalised. Model is leverage existing infrastructure, not organic expansion.

Cost of funds benefit (40 bps YoY) ongoing; yield compression from secured/MSME mix. No quarterly NIM bridge shown in call.

Senior citizen term rates cut from 9.1% to 8.25%; general rates 8.5% to 8.1%. Repricing benefit unfolding progressively.

Targeted for operational leverage; no heavy branch capex planned. Cost control focus.

CRAR boost 250 bps from NCD; no dilution expected in FY27.

Q1 FY27 portfolio near-zero growth after accounting for write-offs/rundown. Disbursements +49% YoY but not translating to net AUM growth. Management flagged Q1 as seasonally weak; H2 momentum critical but unproven.

Management acknowledged recoveries in retail/secured are slow due to SARFAESI legal process (6-7 months). MSME NPA ₹169 Cr (3.8% of ₹4,482 Cr book) is concentrated. Analyst challenged why recoveries aren't matching SFB industry trends.

Analyst Saurabh Jain challenged whether quality improvement is real or if growth is masking underlying stress patterns. MBBL 147% growth relies on existing customer base (99.9%), but scale-up to include new-to-bank is just piloted. Historical stress in JLG acknowledged.

Q1 FY27 loss ₹34 Cr. Guidance claims 2-digit ROE by FY27 exit and 15% by FY28. This requires ₹140-160 Cr FY27 PAT from loss position, contingent on AUM growth, credit cost normalisation, and cost of income improvement—all uncertain.

Deposit growth only +3% YoY despite rate cuts. CASA ratio 22% (improved from lower levels but still below target). If market rates stabilize/rise, refinancing risk on deposits; re-pricing benefit may not sustain.