# 1. Financial Performance ## A. Key Figures * **Total Income:** **₹55 Cr** Q2 (+10% YoY) * **PAT:** **₹0.3 Cr** Q2 (flat YoY) * ROA (H1 FY'26): 0.1% ## B. Revenue & Income * **Resilient Performance:** Top-line growth achieved despite muted disbursements, supported by declining OPEX and borrowing costs. * **Portfolio Quality:** **50% of portfolio in secured lending** yielding ~25%, underpinning stable returns amid lower overall yields. ## C. Profit & Margins * **Profit Pressure:** Profitability impacted by higher credit costs and provisioning, particularly in the lower-end MFI segment. * **Cost Efficiency:** Lower operational costs from secured loan book (e.g., long-tenure ₹15 lakh loans) offset margin pressure from lower yields. --- # 2. AUM & Loan Book ## A. Key Figures * **AUM:** **₹892 Cr** (Q2 FY'26) (+16% YoY) · **₹693 Cr** on-book (78%) · **₹199 Cr** managed (22%) * **Disbursements:** **₹115 Cr** in Q2 FY'26 (+23% QoQ) · **69%** secured share (vs. 43% YoY) * **Secured Loan Book:** **55%** of AUM (Sep '25) (vs. 32% YoY) · **90%** of disbursements secured ## B. On-Book & Managed AUM * **Portfolio Growth & Security Shift:** Strong double-digit AUM expansion driven by strategic pivot toward secured lending, now representing majority of the asset base. * **Product Innovation:** Launch of salaried LAP product broadens addressable market by targeting hybrid-income customers with stable repayment capacity. * **Geographic Leadership:** Madhya Pradesh and Uttar Pradesh remain core contributors, underpinning regional concentration in high-growth markets. ## C. Disbursement Growth * **Upscaling of Ticket Sizes:** Significant shift to higher-value lending, with **INR 5–10 lakh** loans rising from 19% to **60% of disbursements**, enhancing revenue per loan and credit quality. * **Secured Lending Momentum:** Rapid adoption of secured products, supported by FLDG guarantee coverage on two-thirds of unsecured flow, de-risks growth trajectory. ## D. Secured vs Unsecured Mix * **Strategic Diversification:** Marked decline in livestock exposure (from 64% to 37%) reflects successful pivot to upper-tier micro-enterprises and non-cyclical sectors, reducing concentration risk. * **Superior Secured Performance:** New secured book demonstrates stronger customer quality, **very marginal delinquency** across key states, and long-term tenures (~10 years) that enhance portfolio stability. * **Evolving Customer Profile:** Secured borrowers now include established business owners (e.g., hardware, grain, retail) with **INR 30–60 lakh inventories** and **properties worth ₹40–50 lakh+**, signaling upgrade in creditworthiness. * **Structural Advantages:** Fully secured portfolios enable stronger equity retention through lower risk, improved asset quality, and reduced expense ratios over time. --- # 3. Asset Quality & Credit Costs ## A. Key Figures * **Q2 FY'26 Disbursements to 650+ Bureau Score:** **72%** (vs. 50% YoY) * On-Book Gross NPA: 3.26% (Q2 FY'26) · On-Book NPA: 1.66% (Q2 FY'26) * **Secured Borrowers with 1–2 MFI Loans:** **29%** (Jun-25) vs. 50% (Jun-24) * **Provision Coverage Ratio:** **50%** * **H1 Credit Cost:** **3.02%** * **FY'26 Credit Cost Guidance:** **3%–5%** * **Collection Efficiency (Secured Lending):** **96%** ## B. NPA Trends * **Strategic Shift to Higher Credit Quality:** Lending increasingly concentrated in borrowers with bureau scores above 650, reflecting deliberate risk de-rating and improved customer profiling. * **Asset Quality Stabilizing:** Recent NPA improvements driven by ARC transaction and collections; new 18-month portfolio showing significantly better performance and lower slippage trends. * **Customer Profile Upgradation:** Secured borrowers now exhibit formalization (GST, ITR, banking behavior), stronger collateral, and reduced microfinance dependency, supporting long-term credit discipline. ## C. Provision Coverage * **Conservative Risk Buffer Maintained:** Provision coverage held steady at 50%, balancing caution with improving underlying asset quality. ## D. Credit Cost Guidance * **Near-Term Pressure, Medium-Term Relief:** Current credit costs remain elevated due to lagged recognition of new slippages, despite past NPA sales; outlook calls for continued decline toward 3%–5% range in FY'26. ## E. Collection Efficiency * **Collections Gaining Traction:** Efficiency improving across new markets and secured segments, with structural upgrades in recovery teams and systems driving progress toward benchmark levels. * **Legal Recovery Showing Promise:** Early enforcement actions yielded partial recoveries, with projections indicating full cost recovery possible from 5–6% of legal cases, validating strategic litigation despite system delays. --- # 4. Funding & Cost of Capital ## A. Key Figures * **Avg. Lending IRR:** **26.4%** (↓ from 29%) * **Avg. Borrowing IRR:** **12.8%** (balance sheet) · **12.1%** (incremental) * **Liability Mix:** **43%** debt capital markets · **28%** BIs · **28%** banks * **Liquidity Buffer:** **₹97 Cr** (as of Sep 30) ## B. Borrowing IRR * **Strategic Shift Lowers Returns:** Significant decline in lending IRR reflects pivot to secured lending, enhancing portfolio stability and capital efficiency. * **Funding Efficiency Gains:** Secured portfolios benefit from longer tenures and higher equity, driving down borrowing costs and credit losses. ## C. Cost of Funds * **Cost Compression Pathway:** Average cost of funds at 8%, with incremental funding near **1%**, signaling strong downward trajectory supported by scale and regulatory tailwinds. * **Optimism on Future Funding:** Management expects cost of funds to trend toward **single digits** on back of potential rating upgrades and operational leverage. ## D. Liability Mix & Liquidity * **Diversified & Resilient Funding Base:** Well-balanced liability structure across markets, banks, and BIs reinforces funding resilience. * **Equity Inflow Bolsters Capital:** **₹8 Cr** raised in equity with **₹72 Cr** expected by Mar-26, supporting growth while maintaining a healthy **CRAR of 1%**. --- # 5. Branch & Operational Efficiency ## A. Key Figures * **Branch Count:** **160** operational branches pan-India * OPEX as % of AUM: 12.7% (vs. 12.8% in FY’25) * **Login-to-Disbursement Ratio:** **40%** achieved in October (from 15–20% in September) * **Target OPEX/AUM:** Below **10%** over next two years * **Target Conversion Ratio:** **50%** by November ## B. Branch Productivity * **Network Optimization:** Focus on maximizing output from existing **160 branches**; no expansion planned as current footprint supports AUM growth for FY26–FY27. * **Performance Leverage:** Strategic shift toward improving operating leverage through enhanced branch-level productivity and **OPEX containment**. * **Growth Threshold:** Further expansion contingent on achieving **~INR 100 Cr monthly disbursements**, signaling disciplined scaling. ## C. Login-to-Disbursement Ratio * **Sharp Conversion Improvement:** Login-to-disbursement ratio doubled to **40%** in October, now meeting industry benchmark for secured lending. * **Quality Over Quantity:** Introduction of **login fees** filtered low-quality applications, driving **20–25% higher sanctions** despite lower login volume. * **Stronger Loan Profile:** Rising average login value, with increasing cases of **INR 15–25 lakh** tickets, reflects improved borrower quality and demand. * **Digital Efficiency Gains:** Hybrid model powered by real-time offline app and AI-driven cattle verification enhances speed, accuracy, and risk control. ## D. OPEX per AUM * **Cost Scalability Pathway:** OPEX/AUM improved to **7%**, with structural decline expected as AUM scales—**~3%** achievable at **INR 20,000 Cr AUM**. * **Technology as Enabler:** **Cattle AI** launched in March 2025 to strengthen underwriting and portfolio management, supporting long-term efficiency. * **Growth-Linked Cost Curve:** Current OPEX pressure partly due to muted AUM growth; operating leverage expected to accelerate with scale. --- # 6. Credit & Portfolio Risks ## A. Risk Environment & Sector Trends * **MFI Sector Rebounds from Overleverage:** Performance in the MFI segment, previously weakened by regulatory constraints and excessive leverage, shows marked improvement as overleveraging has declined significantly over the past 1–5 years. * **Rural Recovery Underway:** The rural economy is regaining momentum, supported by strong monsoon rains and better agricultural outlook, which should enhance Kharif sowing and stimulate rural demand. * **NBFC Sector Stabilizing:** Improved regulatory stance and governance have contributed to stabilization across the NBFC sector, creating a more favorable operating environment. ## B. Legal Recovery Framework * **Recovery Timelines Defined:** Legal processes for non-bailable warrants are expected to take **18 months**, with cases filed in June 2024 projected to conclude by December 2025. * **Secured Loans Deliver Superior Recoveries:** Instruments backed by collateral benefit from effective enforcement mechanisms—**SARFAESI and Section 138**—leading to higher recovery rates versus unsecured exposures. ## C. Strategic Risk Mitigation * **Growth Anchored in Underwriting Discipline:** Expansion is being driven by conservative underwriting, a shift toward **secured lending**, diversified risk, and leadership strengthening, all focused on enhancing asset quality and long-term resilience. --- # 7. Guidance & Outlook ## A. Key Figures * **AUM Growth Target:** **25–30%** YoY for next year · **₹1,800 Cr+** by Mar-27 * **Secured Lending Target:** **70%** of AUM by Mar-26 · **80%** by Mar-27 · **80–85%** long-term * ROA & ROE: 0.1% ROA and 0.4% ROE reported, below potential due to credit costs and flat AUM * **Funding Inflow:** **₹80 Cr** expected from warrant conversion (Dec–Feb) ## B. AUM Growth & Market Conditions * **Growth Strategy Intact:** Guidance unchanged despite improving portfolio quality, reflecting confidence in large secured loan market and cyclical recovery tailwinds. * **Selective Expansion:** AUM growth to be paced by transaction availability, not forced, amid a **5–6 year cyclical trough** now showing signs of reversal. * **Performance Recovery:** MoM and QoQ metrics improving, driven by shift to secured lending and **operational efficiency gains**. ## C. Secured Lending Transition * **Asset Quality Focus:** Strategic pivot toward secured lending accelerating, with **80% of portfolio targeted as secured by Mar-27** to reduce defaults and de-risk balance sheet. * **Long-Term Identity Shift:** Firm positioning to become a **primarily secured lender**, aligning with best-in-class risk-return benchmarks. ## D. Return Metrics & Funding Trajectory * **ROA/ROE Headroom:** Current returns suppressed by elevated credit costs; **material improvement expected in H2** as AUM scales and credit environment stabilizes. * **Funding Momentum Building:** Market conditions sequentially improving (Q2 > Q1, Q3 > Q2), with **₹80 Cr warrant conversion imminent** and **larger funding round targeted within 12 months**. * **Investor Confidence Rebuilding:** Management expresses optimism on ground-level recovery and cites government policy support as incremental tailwind.