# 1. Financial Performance ## A. Key Figures * **Loan Portfolio:** **₹1,17,000 Cr** (+18% YoY), with core secured segments at **88% of book** (+22% YoY) * **Deposit Base:** **₹1,27,000 Cr** (+31% YoY), **CASA up 16% YoY** (Current +34%, Savings +13%) * PAT: ₹581 Cr (+16% YoY) · ROA: 1.5% (quarterly) ## B. Loan & Deposit Trends * **Secured Lending Momentum:** Strong double-digit loan growth concentrated in retail-secured and commercial banking, now comprising the vast majority of the portfolio. * **Deposit Strength & CASA Mix:** Robust deposit expansion with healthy current account growth, signaling low-cost funding resilience amid rising liquidity. ## C. Profitability & Margin Dynamics * **Resilient Earnings Amid Pressure:** Profit growth and stable ROA achieved despite significant margin compression from yield declines in unsecured and variable-rate assets. * **Yield Compression Drivers:** Asset yields down on repo rate pass-through, lower credit card returns, and reduced MFI exposure; investment yields also softened in lower rate environment. * **NIM Outlook:** Margin pressure partially offset by lower cost of funds; liquidity-driven drag of ~10 bps expected to reverse over the year. ## D. Cost Efficiency & Opex Management * **Cost Discipline Intact:** Opex growth moderated to low single digits YoY, driven by sharp cuts in digital marketing and branding, supporting a **cost-to-income ratio of 54%**. * **Efficiency Push Continues:** Ongoing productivity initiatives and merger synergies enabling strategic hiring while maintaining tight control on operating expenses. * **Funding Cost Optimization:** Proactive deposit pricing actions across savings and fixed deposits aligned with easing rates, reinforcing margin management. --- # 2. Loan Book & Asset Quality ## A. Key Figures * **Retail-Secured Assets:** ₹79,000 Cr (+20% YoY, +3% QoQ) (67% of portfolio) * **Unsecured Segment:** -23% YoY, -7% QoQ (8% of portfolio) * **MFI Portfolio:** ₹6,200 Cr (part of ₹6,500 Cr Inclusive Finance Book) (-22% YoY, -7% QoQ) * **Credit Cost Guidance:** ~1% of average total assets (+10–15 bps) ## B. Retail-Secured Assets * **Core Growth Engine:** Retail-secured assets remain the dominant, high-yielding segment with strong scale, quality, and consistent **ROA above 2%**, supported by diversified risk and distribution expansion. * **Regional Yield Differentiation:** Southern mortgage operations deliver **high yields of 18%–5%** with distinct risk-reward dynamics and pre-established recovery infrastructure, expected to show results in coming quarters. * **Stable Funding Structure:** **6% of the loan book** is floating rate but locked in fixed-rate period through FY26, minimizing near-term repricing or exit risk. ## C. Unsecured Segment Stress * **Deteriorating Credit Trends:** Unsecured segment under significant pressure, with **credit card receivables showing higher stress than MFI**, contributing to elevated credit costs and downward guidance revisions. * **Data Correction Disclosed:** Share of revolver in credit card receivables for Mar-25 quarter revised down to **35%** from previously reported 38%, with prior year figure acknowledged as erroneous. ## D. MFI Portfolio Trends * **Bottoming Out:** MFI book contraction of **6% this quarter** seen as trough, with stabilization expected and **~5% growth projected for FY26**, despite ongoing de-growth and asset quality challenges. * **Guarantee Mitigation:** **97% of Q1 MFI disbursements covered by CGFMU guarantees**, significantly de-risking incremental exposure and raising total portfolio coverage to **over 50%**. * **Resilient Profitability:** MFI remains profitable for FY25 even after higher credit costs, with full-year **MFI credit cost guidance raised to ~5%** (from 3%–4%). ## E. Credit Cost Guidance * **Guidance Raised, Peak Likely Passed:** Full-year credit cost increased to **~100 bps**, driven by MFI and southern markets, but management asserts **credit costs have peaked in absolute terms** and will decline from current quarter. * **Secured Asset Normalization:** Retail-secured credit costs expected to normalize at **75–80 bps** (vs. prior sub-70 bps), reflecting scale and macro conditions, with improvement anticipated next year. * **Forward-Looking Protection:** Sanjay Agarwal confirms **full MFI credit guarantee coverage expected by next year**, which would cap **MFI credit costs at 3%–5%** even in current stress environment. --- # 3. Segment & Product Mix ## A. Key Figures * **Wheels GLP:** ₹38,000 Cr (32% of total) (+26% YoY) · **Yield:** >14% (+3 bps QoQ) * **Gold Loan GLP:** ₹2,000 Cr (2% of total) (+11% YoY) · **Yield:** ~16% · **ROA:** >3% * Mortgage GLP: ₹39,000 Cr (33% of total) (+14% YoY) · MBL ROA: >2.5% * **Credit Cards & Personal Loans GLP:** ₹3,000 Cr (3% of total); **Credit Card Book:** ₹2,300 Cr (–27% YoY) ## B. Wheels & Vehicle Finance * **Market-Leading Wheels Growth:** Wheels segment delivered strong double-digit expansion, driven by distribution scaling—**70% increase in branches since Mar '24**—and diversified product reach across vehicle types and geographies. * **Strategic Franchise Building:** Gold loan business poised for scale-up post-RBI harmonization, leveraging Fincare-acquired southern footprint and capabilities, despite modest current portfolio size. * **Resilience Amid Sector Stress:** Limited exposure to stressed used SCV/HCV segment; asset quality remains intact with no geographic concentration in risk. * **Yield Stability Maintained:** Despite competitive liquidity pressures in fixed-rate vehicle financing, pricing discipline holds with no material rate cuts observed. ## C. Mortgage & MBL Growth * **High-Yield, Scalable MBL Engine:** MBL contributes meaningfully to mortgage growth with **ROA exceeding 5%**, supported by predominantly fixed-rate book and unmatched peer-scale economics. * **Growth Acceleration Targeted:** Mortgage portfolio on track to lift growth from ~15% to **over 20% in coming years**, fueled by southern market integration and distribution expansion. ## D. Commercial Banking * **Above-Market Growth Ambition:** Commercial banking segments—particularly business banking, agri, and NBFC—are targeted for **north of 25% growth**, underpinned by re-segmentation and strategic focus. ## E. Credit Cards & Personal Loans * **Sharp Contraction in Unsecured Book:** Credit card portfolio undergoing significant degrowth (**–27% YoY**), reflecting deliberate risk management and strategic pullback in personal loans. --- # 4. Branch & Distribution Network ## A. Key Figures * **Branch Count:** **532 → 924** MBL (Mar '24 → Mar '25) · **350 → 850** Gold Loan (Mar '24 → Mar '25) * **Branch Profitability:** **49%** of pre-existing branches profitable in Q1 FY26 (vs. **34%** same quarter prior year) ## B. Branch Expansion Plan * **Granular Deposit Growth Strategy:** Focus on targeted acquisition and digital-led engagement across a full retail product suite to drive low-cost deposit expansion. * **Aggressive Network Scaling:** Distribution infrastructure expanding rapidly in top cities with **70–80 new deposit branches** planned this year and **over 200 more in FY '26**, despite high competitive intensity. ## C. Branch Profitability * **Rising Profitability Trajectory:** Significant improvement in branch-level economics, with nearly half of legacy branches now profitable, reflecting better productivity and operating leverage. --- # 5. Credit & Collection Risks ## A. Key Figures * **Southern Mortgage Exposure:** **15%** of total portfolio (higher yield: 17–18% vs. 14%) * Collection Efficiency (Non-OD MFI): 98.7% in March; recovery seen from April–July * **Credit Card Revolver Book:** **₹700–720 Cr** outstanding, under NPA/write-off assessment ## B. Southern Market Challenges * **Regional Stress Contained:** Deterioration in credit costs focused on **AU-specific southern mortgages** from Fincare acquisition, with granular exposure and operational churn due to team transition. * **High-Yield, Manageable Exposure:** Stressed southern book represents a **small, high-yield subsegment**; remedial actions underway with **normalization expected by year-end**. * **No Broader Portfolio Concerns:** Issues are **geographically isolated**; no enhancement of collections needed outside South, leveraging proven strategies from North/West. ## C. Collection Efficiency * **Sequential Improvement Trend:** Collection performance shows **positive monthly momentum**—May > April, June > May, July > June—indicating stabilizing credit quality. * **Credit Costs Peaking:** Card segment costs may have **peaked in absolute terms**, with prior limit reductions on risk pool; elevated in Q2 but **expected to normalize in H2**. * **Strong Recovery Infrastructure:** Robust legal recovery mechanisms under **SARFAESI Sections 4 and 2** now in place, addressing past enforcement gaps. * **H2 Recovery Outlook:** Data signals **strong recovery performance from July onward**, supported by improving collection efficiencies. ## D. Underwriting Tightening * **Structural Credit Governance Upgrade:** Shift to **stricter credit culture** with separation of sales and credit functions; **Vivek Tripathi appointed Chief Credit Officer**. * **Comprehensive Risk Initiatives:** New scorecards (ETB/NTB/behavioral), **new LOS platform**, and centralized scorecard hosting in progress; full rollout expected in months. * **Corrective Actions Embedded:** Past-year tightening across **acquisition, underwriting, collections, and ops metrics**; de-growth likely arrested by Q3. --- # 6. Guidance & Outlook ## A. Key Figures * **MFI Book Target:** **₹7,000 Cr** by year-end (+5%) * **Q1 YoY Growth:** **18%** despite seasonality * **Nominal GDP Projection:** **~9%** (5% real + 3–5% inflation) * ROA: 1.5% achieved last year · 1.8% targeted for FY27 * **Credit Costs Guidance:** **~100 bps** expected (vs. prior 85–90 bps) ## B. Growth Rate Target * **Moderating Growth Trajectory:** Outlook tempered by macro constraints; targeting 2–5x nominal GDP growth amid seasonal weakness and segment-specific stress. * **Near-Term Headwinds:** MFI collection efficiency weakened due to seasonality, regulatory impacts, and MFIN guardrails, delaying recovery by one quarter. * **Cautious Expansion in Cards:** Credit card strategy prioritizes loss control, break-even stabilization, and performance normalization before growth. * **Confidence in Recovery:** Despite current challenges, management expresses confidence in sustained growth, citing past resilience and expected macro improvement. ## C. NIM Recovery Path * **NIM Bottoming in Q2:** Margins expected to trough in Q2, with gradual recovery from Q3 onward supported by lower cost of funds and liquidity normalization. * **Partial Margin Rebound Expected:** Management anticipates partial NIM recovery in H2, with full restoration likely by next fiscal, despite yield pressure from liquidity surplus. * **Supportive Macro Backdrop:** RBI policy easing, good monsoon, rural income recovery, and festive demand seen as key drivers of H2 improvement. * **Fixed-Rate Book Provides Stability:** 70% fixed-rate loans offer insulation, though near-term margin pressure remains from immediate yield transmission on rate cuts. ## D. ROA Long-Term Goal * **ROA Expansion Pathway:** Confirmed 8% ROA target for FY27, with expectation of steady improvement this year on larger scale and easing NIM pressure. * **Long-Term Franchise Building:** Emphasis on sustainable, scalable model over 10-year horizon, with corrective actions in MFI and credit card segments underpinning future stability. * **Credit Cost Assumptions Under Review:** Investor inquiry highlights focus on cross-cycle provisioning assumptions for MFI (5–3%) and potential parallel framework for credit cards post-stabilization.