# 1. Financial Performance ## A. Key Figures * Net Interest Income: ₹2,192 Cr (Q2FY26) (+4.8% QoQ, +19.6% YoY) * **Profit After Tax:** **₹581 Cr** (Q2FY26) vs. ₹568 Cr prior quarter * Net Interest Margin: 7.9% (Q2FY26) vs. 7.7% (Q1FY26) and 7.5% (Q2FY25) * **Pre-provisioning Operating Profit:** **₹1,502 Cr** (Q2FY26) vs. ₹1,388 Cr prior quarter * RoA (annualized): 1.93% (reported), 2.02% (adjusted) · H1FY26 RoA: 2.1% * **RoE (annualized):** **23%** (Q2FY26) * Cost-to-Income Ratio: 41.6% (H1FY26) vs. 43.0% prior * Capital Adequacy (CRAR): 21.82% (Sep 2025) ## B. Margins & Profitability Drivers * **Sharp NIM Expansion:** Net interest margin rose significantly to 9%, reflecting improved asset yields and favorable repricing dynamics in a stable rate environment. * **Operating Leverage Improves:** Pre-provisioning profit grew robustly QoQ, supported by disciplined cost control and revenue momentum. * **Efficiency Trajectory Intact:** Cost-to-income ratio improved to 6% in H1 and is expected to trend toward a **target range of 5%**, underpinned by operating discipline. * **High Reported RoA Driven by OFS Assets:** Annualized RoA of 93% includes impact of **₹9,000 Cr OFS assets**; adjusted RoA of 02% provides a clearer view of core lending performance. ## C. Balance Sheet & Funding Structure * **Resilient Capital Position:** CRAR of 82% underscores a deeply well-capitalized balance sheet, providing buffer and flexibility for future growth. * **Stable and Diversified Funding:** 95% of borrowings are EBLR-linked, ensuring alignment with market benchmarks and reducing interest rate mismatch risk. * **Positive Liquidity Profile:** Borrowing mix shows a positive cumulative mismatch across all maturity buckets up to 5 years, indicating structural liquidity strength. --- # 2. Loan Book & Asset Quality ## A. Key Figures * **Gross Loan Book:** **₹111,409 Cr** (Sep 2025) (+1.9% QoQ, +13% YoY) · **73% secured** * Gross Stage 3 (NPAs): 2.81% (Sep 2025) vs. 2.56% (Jun 2025) * **Credit Cost:** **₹748 Cr** (QoQ: ₹670 Cr) * **Provision Coverage Ratio (Stage 3):** **54.73%** (Sep 2025) ## B. Asset Quality Trends * **Sharp Deterioration in CV Segment:** Surge in Stage 3 NPAs primarily driven by commercial vehicle portfolio, with minor spillover from construction equipment due to sectoral linkages. * **Geographic & Operational Headwinds:** Flood-like conditions in Assam and northern belt disruptions delayed recovery momentum toward quarter-end, exacerbating slippages. * **Stabilizing Collection Efforts:** Stage 2 assets show stability or improvement, supported by enhanced collection efficiency; recent actions in July–August curbed further slippages. ## C. Credit Cost & Provisioning Dynamics * **Higher Credit Costs Reflect Portfolio Mix Shift:** Increase in provisions tied to secured book inflows and evolving product risk profile, with Stage 3 dynamics outweighing stable Stage 2 provisioning. * **Provisioning Adjustments Across Stages:** Decline in Stage 1 PCR attributed to book mix changes, while Stage 3 coverage remains robust at 73%, indicating targeted reserve adequacy. --- # 3. Segment & Product Mix ## A. Key Figures * Disbursements: ₹15,599 Cr (Q-Sep 2025) (+2.8% QoQ) * Customer Franchise: 21.0 million (+19.6% YoY, +4.2% QoQ) * **Segment Mix:** **~38%** Enterprise Lending · **~38%** Asset Finance · **23%** Consumer Finance * **BPO PAT:** **~₹15 Cr/quarter** (~₹60 Cr annualized) ## B. Enterprise Lending * **Secured Lending Momentum:** Growth in enterprise book driven by strong performance in gold loans, supported by regulatory changes and rising gold prices. * **LAP Focus & Stability:** Loan Against Property portfolio concentrated in high-ticket loans (≥₹25 Cr), with stable credit quality and minimal exposure to sub-₹10 lakh tickets. * **Unsecured Business Loan Recovery:** Cautious approach yielding stabilization in Q1 and slight improvement in Q2, with return to growth expected as portfolio matures. * **Stable Underwriting Discipline:** Approval rates in enterprise lending remained consistent despite policy adjustments, reflecting disciplined risk management. ## C. Consumer Finance * **Resilient Growth Trajectory:** Consumer segment grew moderately despite deferred demand ahead of anticipated GST reductions in key categories like two-wheelers and durables. * **Strategic Mix Shift:** Consumer book has evolved into a major balance sheet contributor from ~10% pre-pandemic, making historical credit cost comparisons less relevant. * **Cross-Sell Engine Scaling:** Relationship PL—offered exclusively to existing customers—drives engagement and cross-selling, particularly as borrowers near maturity. * **High-Growth Focus Area:** Consumer finance, with a 40%+ CAGR over four years, is expected to expand its share by several percentage points over the next 3–5 years. ## D. Asset Finance * **CV Segment Composition:** Commercial vehicle portfolio comprises **16% new CVs** and **9% used CVs**, with selective growth focus and restraint in volatile segments like HCV. * **Niche Customer Base:** CV and CE segments serve only **10,000–20,000 customers**, limiting cross-sell scale versus the 1 crore consumer base. * **Portfolio Diversification Focus:** No fixed asset mix targets; strategy emphasizes long-term, diversified growth across verticals. --- # 4. Underwriting & Risk Framework ## A. Segment-wise Policy * **Stable MSME Risk Profile:** The MSME segment within Enterprise Lending shows **continued stabilization** with no meaningful uptick in credit stress, indicating effective segment-level risk management. * **Customized Underwriting Framework:** Enterprise Loans employ **bespoke, non-standardized underwriting** with granular credit evaluations, enabling tailored policies for micro markets and customer segments. * **Segment- and Geography-Driven Decisions:** Underwriting is guided by **Chief Credit Officer-led analysis** on a segment- and region-specific basis, avoiding broad-based or uniform risk rules. * **Targeted Policy Adjustments:** Unsecured lending norms were revised **~1 year ago** to mitigate risks from multi-lender borrowers, reflecting proactive risk calibration in selective segments. * **Technology-Enabled Customer Experience:** Strategic focus on **sub-two-minute loan disbursals** and seamless digital journeys to strengthen competitive positioning on service and tech. ## B. PD & LGD Approach * **Consistent, Formula-Based Provisioning:** No structural shift in provisioning strategy; remains driven by **portfolio mix, product-level PD-LGD models**, and segment composition (e.g., LAP, Consumer Finance). * **Long-Term Risk Assessment:** PD and LGD assumptions are grounded in **5–8 years of historical data** and **through-the-cycle analysis**, ensuring robustness across economic cycles. * **LAP Underwriting Rigor:** Requires **collateralized property ownership** and proven **high business cash flows** (e.g., **₹50,000+ monthly EMI capacity**) to support large-ticket, long-tenure loans. * **Sustainability-Centric Lending:** Extended tenures in LAP demand strong conviction in the **long-term viability of the borrower’s business model** to manage duration risk. * **Holistic Credit Evaluation:** Approval decisions integrate **income, cash flows, financial history, forecasts, and total leverage**, prioritizing comprehensive risk view over credit scores alone. --- # 5. Demand & Seasonal Trends ## A. Rural & Farm Demand * **Resilient Domestic Activity:** India’s economic resilience persists amid global uncertainties, supported by solid GDP trends and high-frequency indicators boosting rural demand outlook. ## B. CV Market Dynamics * **Seasonal Q2 Softness:** Construction equipment and commercial vehicle performance impacted by temporary rain-related disruptions, including mine flooding, limiting operational activity. * **Underlying Growth Potential:** CV segment shows positive financing trends in used vehicles, with credit demand anchored in consumption and construction sectors. --- # 6. Credit & Portfolio Risks ## A. CV Segment Stress * **Persistent CV Financing Stress:** Commercial vehicle financing continues to face asset quality pressures in Q2, with vehicle idling significantly elevated compared to prior years, driven by extended monsoon seasons disrupting customer cash flows. * **No New Stress Segments:** Asset quality deterioration remains confined to the CV segment, with no emergence of new retail stress areas in the quarter. * **Used Vehicle Market Impact:** Investor focus on whether stress is concentrated in new vs. used CVs, with particular attention to the correction in used CV prices as a potential amplifier of credit risk. * **Credit Cost Trajectory in Focus:** Market participants assessing whether elevated credit costs—persisting since Q3 of the prior year—have peaked, with expectations for normalization beginning in Q3. ## B. Climate Impact Risk * **Climate Risk Scrutiny:** Growing investor concern over the long-term impact of climate change on asset quality, including potential need for additional provisions and implications for sustainable credit cost assumptions. ## C. Multi-lender Exposure * **Cautious Stance on Unsecured Loans:** Company maintains conservative underwriting in unsecured business lending, with growth expected to resume only as CV-related asset quality pressures subside. --- # 7. Guidance & Outlook ## A. Key Figures * Credit Cost: 2.7% current level · 2.2% ± medium-to-long-term target (3–5 years) ## B. Credit Cost Forecast * **Downward Trajectory Expected:** Management expects current elevated credit costs to decline in upcoming quarters, with improvement potentially visible from **Q3 onwards**, supported by moderating stress and conservative underwriting over the past three quarters. * **Forward-Looking Framework:** Credit cost modeling is being refined across expanding asset classes, though no detailed methodology or near-term forecast was provided. ## C. H2 Growth Momentum * **Strong H2 Growth in Sight:** Positive book growth momentum expected in H2 and FY27, driven by festive demand, favorable policy shifts, and upbeat market sentiment, particularly in Asset Finance. * **Broad-Based Expansion:** Growth anticipated across all major product segments, with commercial vehicle loans set to improve alongside economic recovery and rising business confidence. * **Accelerating Credit Growth:** Q3 and Q4 expected to outperform first-half trends, with management citing healthy momentum and positive signals from broader banking sector commentary. ## D. Strategic Priorities * **Growth Over Cost-Cutting:** Strategic focus remains on long-term investment, medium-term growth targets, and RoA enhancement rather than short-term expense reduction. * **Business Lending Resumption:** Plans to expand in the business loan segment as stability improves, following a period of caution. * **Improving Competitive Dynamics:** Early signs of reduced irrational competition in certain segments point to a more rational market landscape ahead. * **GST Tailwinds:** Recent government GST rate cuts have lowered commercial vehicle ownership costs, offsetting prior demand deferrals and supporting a positive outlook.