Portfolio quality improving, but revenue growth lags disbursement surge

Disbursements up 88% YoY to ₹1,783 Cr; AUM 4% QoQ to ₹7,702 Cr; Revenue only 5.5% YoY

PPOP ₹102 Cr vs ₹87 Cr YoY (17% growth); PBT up 67% QoQ but Q4 was abnormally low at ₹37 Cr

GNPA 2.51% (down from 3.21%), collection efficiency 99.75%+, credit cost ₹40 Cr (7th quarter decline)

June data: 39%, July data: 42%; trend confirmed through early August at strong collection levels

Current NIM 11.93%; management cites 55 bps customer yield increase (12 bps already in book), implying 25-30 bps additional upside

Fusion+2 reapplied to 80% of branches (Category A) after testing portfolio; approval rates recovered from 3-4% dip; July data showed 42% new customers (vs 37% Q1 average).

₹1,880 Cr in Q1 reduced to ₹1,400 Cr by early August (less than ₹50 Cr borrowing in July). Plan to hold at ₹1,400-1,450 Cr (few months' disbursement buffer).

Moved from 30% external agencies to 100% in-house (warm bodies + AI bots). Maintaining ₹35 Cr quarterly from 60+ DPD and ₹21 Cr from written-off portfolio.

Initial 50 of 200 planned MFI branches (hub-and-spoke) launching Q1. Target MSME to 15% of AUM next year (currently ~9%), then 20% in 2 years. Ticket size ₹7.5-8 lakh; collection efficiency 99.3%+.

Right branches in right markets. For ₹12,000 Cr AUM target via 20-25% CAGR, need only 1,350-1,400 branches across MFI+MSME. Closing 100 underperforming branches (low headroom, below-par returns); opening 50 high-potential branches.

Approval rates dipped 3-4% due to Fusion+2 guardrail for West Asia crisis. Portfolio pristine, so Category A branches (80%) relaxed back to Fusion+2. New customers already rising: 37% Q1 avg, 39-40% June, 42% July. No reliance on individual loans for H1 disbursement (45%). First week August encouraging—on track.

15-20 bps expansion bare minimum by year-end (conservative). 55 bps customer yield increase, only 12 bps in book so far; full ramp by year-end = 25-30 bps upside. Range to 25 bps if all factors align.

Every segment (prime, mid, subprime). Subprime exited in deleveraging cycle. We target prime+mid. Collection efficiency 99.7%-99.8% across rain-fed and heat-stressed states July-Aug. Guardrails tight enough. Not a challenge.

Board approved; system dev in progress. First disbursement first week Sept. Ticket ₹1.5 lakh avg; shop/outlet owners, 3-year business vintage. Pricing same to 100 bps lower vs MFI. Separate credit team (PQM). Not simple JLG-to-individual conversion; serious banking-grade credit. Start existing customers; ramp to new.

Recoveries ₹35 Cr 60+ DPD, ₹21 Cr write-off book. Moved to in-house AI + warm-body model. Potential ₹600 Cr write-off book, ~30% settlement = ₹180 Cr; at 15-18 months = ₹10 Cr/month. Currently ₹7 Cr; more tech+data = higher delivery. ECL coverage stable MSME/MFI individually; composition shift (lower-LGD MSME growing) lowers blended coverage optically.

36.95% CAR currently (36% Tier 1). Regulatory min 15% Tier 1. Internal policy min 23-25%. On road 6-7 months before need: mid-FY28 (middle of next FY27/28). Not urgent next 1.5 years.

Currently ₹7,702 Cr. Requires ~29.6% growth in 9 months. 45% disbursement in H1, 55% in H2. Management confident on guardrail relaxation + collection strength + individual loans ramp Q3.

55 bps customer yield increase; 12 bps in book. Additional ~25-30 bps to flow as new disbursements ramp and reprice. Assumes no rate cuts.

7 consecutive quarters of decline. Guidance covers 2.5% worst-case if macro event hits. First 4.5 months FY27 tracking 2% (vs 3% upper end).

FY26 full year ₹830 Cr; Q1 FY27 ₹204-205 Cr. New product launch (individual loans) and MSME scaling via hub-and-spoke model (no new real estate). Target 6-7% opex-to-average-AUM by outer years.

Disbursements +88% YoY, AUM +4% QoQ, revenue +5.5% YoY. Gap signals either new customer acquisition at lower yields, mix shift to secured MSME (lower yield), or customer churn in higher-yielding cohorts.

₹10,000 Cr target requires ~29.6% growth in 9 months from ₹7,702 Cr. Depends on guardrail relaxation, individual loan ramp (Q3 onwards), and MSME scaling. Approval rate pressure, market competition, or credit deterioration could derail.

37-42% of Q1 disbursements are new customers (vs historical 25-30%). Individual loan product (launching Sep) and MSME secured offering are unproven in downcycle. Risk of portfolio deterioration if guardrails relax faster than customer quality improves.

MFI customer base includes farmers and rural borrowers sensitive to rainfall, temperatures, and seasonal income. Monsoon failure or extreme weather could trigger collection efficiency deterioration and credit cost spike.

36.95% CAR today; AUM growth of 20-25% CAGR will require capital raise mid-FY28 (~1.5 years). If growth accelerates or market conditions worsen, raise may be forced earlier. Dilution risk for existing shareholders.