# 1. Financial Performance ## A. Key Figures * **Net Interest Income:** **₹6,026.43 Cr** (+12.55% YoY) * **Profit After Tax:** **₹2,155.73 Cr** (+8.84% YoY, +0.76% QoQ) · **EPS: ₹11.46** * Asset Under Management: ₹2,72,249.01 Cr (+16.62% YoY, +3.44% QoQ) ## B. Revenue & Disbursements * **NII Composition Shift:** Reported NII boosted by **₹66 Cr** fair value gains on mutual funds (up from ₹27 Cr), while **no assignment income** was recognized this quarter versus ₹60 Cr prior. * **Fee Income Volatility:** Sharp decline in fee income due to non-recurrence of **₹170 Cr** DA transaction commission; management clarifies this is non-recurring and unlinked to current disbursement trends. ## C. Net Interest Margin * **NIM Under Pressure:** Margin declined 14 bps QoQ to **11%**, driven entirely by **negative carry**—not yield erosion—as yields remain stable YoY. * **Margin Recovery Path:** Incremental borrowing costs at **36%** are significantly below book cost of funds (**86%**), providing a clear runway for future NIM expansion. ## D. Profit After Tax * **Earnings Acceleration:** PAT surged 84% YoY on strong NII growth, despite higher staff and commission expenses. * **Cost Inflation:** Staff costs rose 7–8% QoQ due to annual increments and bonuses; commission expenses increased with seasonal deposit inflows and agent payouts. ## E. Balance Sheet Size * **Balance Sheet Composition:** Current balance sheet of **₹38,000–39,000 Cr** includes encumbered assets (SLR, MTM components), which are **not available as free liquidity**. --- # 2. Loan Book & Asset Quality ## A. Key Figures * Gross Stage-3 NPA Ratio: 4.53% (vs. 5.39% YoY, 4.55% QoQ) * Net Stage-3 NPA Ratio: 2.57% (vs. 2.71% YoY, 2.64% QoQ) * **Write-offs:** **₹448 Cr** (Q1 FY26) * **Provisions:** **₹838 Cr** (Q1 FY26) * **Total Credit Costs:** **₹1,286 Cr** (Q1 FY26) ## B. Stage-3 NPA Trends * **Significant NPA Improvement:** Sharp year-on-year reduction in both gross and net Stage-3 NPAs, indicating stronger asset quality and effective risk resolution. * **Risk Segmentation Discipline:** High Stage-1 probability of default at **82%** reflects conservative early-stage classification, supporting proactive intervention. ## C. Write-offs & Provisions * **Elevated Credit Outflows:** Substantial provisioning and write-offs reflect continued balance sheet cleanup and adherence to conservative credit policies. * **Recovery Efficiency:** Proactive repossession and ability to monetize repossessed vehicles limit losses and prevent default escalation. ## D. Repossession Activity * **Stable Repossession Levels:** No material increase in repossessions nationally, underpinned by strong vehicle resale values suppressing default pressure. * **Highly Liquid Collateral Base:** **65%** of the portfolio in passenger and commercial vehicles and **7%** in two-wheelers ensure rapid collateral enforcement and reduce Stage-2 to Stage-3 migration. --- # 3. Funding & Liquidity ## A. Key Figures * **Deposit Growth:** **10%** QoQ (Q1) * **Cost of Liabilities:** **88 bps** (vs. 95 bps prior quarter) * Leverage Ratio: 4.15x (vs. 4.16x at March end) * Liquidity Coverage Ratio: 268.74% (vs. 286.12% at March end) * **Total Liabilities:** **₹2,42,900 Cr** * **Liquidity Buffer Target:** **₹18,000–19,000 Cr** (3 months’ coverage) ## B. Deposit Growth * **Funding Advantage:** Larger players gaining share as smaller lenders face liability constraints, reinforcing competitive moat. * **Strong Deposit Momentum:** Robust 10% QoQ growth fueled by depositor shift to longer-term instruments post-rate cuts. ## C. Cost of Funds * **Downward Cost Trajectory:** Significant reduction in cost of liabilities, driven by **40 bps deposit rate cuts** and shift toward lower-cost retail deposits. * **Strategic Funding Hierarchy:** Deposits now cheaper than NCDs and bank borrowings; prioritized despite **10–15 bps premium** for relationship and stability benefits. * **Incremental Cost Compression:** Incremental cost of funds dropped sharply to **37%**, with further declines expected as new deposit rates align with market. ## D. Borrowing Mix * **Debt Optimization Underway:** Strategy to moderate borrowing, prepay high-cost debt, and reduce reliance on ECBs and bonds amid elevated liquidity. * **Funding Diversification:** Despite dominance of ECBs and capital market instruments, retail deposits (95%) remain core to stable funding, even with fixed-rate borrowings at **85%**. ## E. Liquidity Coverage * **Excess Liquidity Drawdown:** Currently holding **5 months’** worth of repayments; plans to reduce surplus by **~₹10,000 Cr** over next 3–5 months to ease negative carry. * **Prudent ALM Position:** Strong asset-liability surplus of **over ₹59,000 Cr** in <1-year bucket supports near-term flexibility and de-risking. * **Buffer Composition:** Liquidity buffer includes **liquid mutual fund investments**, not just cash, enhancing yield while maintaining safety. --- # 4. Segment & Product Performance ## A. Key Figures * CV Sales: 83,638 units (-3% YoY) · LCV Sales: 1.40 lakh units (flat) * PV Sales: 10.12 lakh units (-1.4% YoY) · 2-Wheeler Sales: 46.75 lakh units (-6.2% YoY) * **Disbursements:** **₹41,816 Cr** total (Q1 FY'26) · **CV:** ₹16,917 Cr · **PV:** ₹8,162 Cr · **MSME:** ₹6,358 Cr · **2-Wheelers:** ₹3,081 Cr · **Gold Loans:** ₹3,291 Cr · **Personal Loans:** ₹2,205 Cr * CV AUM Growth: 12.3% · PV AUM Growth: 23% * **Branch Network:** **3,220 branches** (+165 YoY, +5 QoQ) ## B. CV & PV Disbursements * **CV Resilience:** Disbursement growth in commercial vehicles sustained by robust rural demand and healthy used-vehicle resale values, supporting operator cash flows and asset retention. * **PV Outperformance:** Passenger vehicle AUM achieved strong double-digit growth despite industry-wide sales decline, driven by market share gains and a shift toward premium, higher-ASP models. * **Structural Growth Drivers:** CV portfolio expansion fueled by replacement cycle of maturing loans and consistent quarter-on-quarter volume-value growth, independent of recent price inflation. ## C. MSME & Gold Loans * **MSME Stability:** Lending growth moderated sequentially due to seasonality, but underlying performance remains stable with no asset quality stress, supported by focus on small-ticket trading/services segments. * **Expansion Runway:** MSME penetration in two-thirds of branches offers significant headroom for future growth as rollout extends to remaining network. * **Gold Loan Tailwinds:** No customer attrition to banks observed; new RBI guidelines for small-ticket gold loans expected to formalize informal sector demand, benefiting NBFCs. ## D. Personal & Two-Wheeler * **Customer Migration Trend:** In-house progression from two-wheeler to four-wheeler financing emerging as key growth lever, reflecting aspirational upgrade within existing customer base. * **Construction Slowdown:** Sharp decline in construction equipment disbursements attributed to early monsoon impact, not credit quality issues. --- # 5. Rural Demand & Economic Drivers ## A. Key Figures * **Monsoon Rainfall:** **9% above normal** (80% subdivisions: normal to excess) * Kharif Sowing: 597.86 lakh hectares (up 37.27 lakh hectares YoY) * GDP Growth: **6.5%** FY25 · projected **6.5%** FY26 * Inflation: CPI 2.10% (June, 6-year low) · WPI -0.13% (June 2025, 20-month low) * Rural Consumption: 7.1% inflation-adjusted growth, outpacing GDP * Auto Sales: 2.23 lakh units Q1 FY26 (-0.6% YoY) * GST Revenue: ₹1.85 lakh crore June (+6.2% YoY) ## B. Monsoon & Agricultural Fundamentals * **Favorable Monsoon Boosts Rural Momentum:** Above-normal rainfall across most regions has created strong agri-economic tailwinds, supporting income and demand recovery. * **Expanded Kharif Sowing Signals Confidence:** Significant year-on-year increase in sown area reflects improved farmer sentiment and input access. ## C. Rural Consumption & Demand Trends * **Rural Recovery Underway:** Real consumption growth exceeding GDP indicates a meaningful rebound in rural purchasing power. * **Aspirational Shift in Vehicle Demand:** Preference for **compact SUVs**—both new and used—is reshaping entry-level markets, with buyers upgrading despite economic constraints. * **Used Car Financing Gains Traction:** Strong growth in **second-hand vehicle financing** in underserved rural and suburban areas, driven by limited public transport and unmet demand. * **LCV Demand Rebounds on Structural Shifts:** Recovery in rural freight demand supported by e-commerce penetration into tier 2/3 towns and improving rural cash flows. ## D. Trucking Activity & Freight Economics * **Trucking Fundamentals Remain Resilient:** Healthy freight rates and utilization due to **no excess capacity**, despite macro slowdown, as high costs deter new entrants. * **Operator Cash Flows Improving:** Ground-level economic activity in freight is recovering, signaling broader rural and logistics revival. ## E. GST Collections & Economic Context * **GST Growth Steady but Seasonally Soft:** YoY expansion in collections masks sequential dip post-festival peak; early monsoon likely dampened June transactions. * **Seasonality Trumps Short-Term Volatility:** First-quarter moderation is typical, with stronger collections expected in second half due to festival demand. --- # 6. Risks & Credit Migration ## A. Key Figures * **GS2 Increase:** **9–10%** QoQ this quarter * **Forward Flow to GS2:** **6%** QoQ last quarter → **10%** QoQ this quarter ## B. Seasonal Cash Flow Mismatches * **Temporary Nature of Stage-2 Migration:** Increase in Stage-2 assets driven by **seasonal factors**, notably early monsoon onset, causing short-term cash flow mismatches with **no significant credit cost impact** expected. * **Proactive Internal Collections:** Direct customer engagement via **in-house executives**—not outsourced agents—ensures timely intervention, supporting resolution of temporary stress and reducing risk of downgrade to Stage-3. * **No Restructuring Policy:** Stage-2 accounts are managed through behavioral improvement only; **no loan restructuring or term modifications** are offered, underscoring confidence in transient nature of delinquencies. ## C. Stage-2 to Stage-3 Pressure * **Contained Credit Risk:** Despite higher inflows into Stage-2, **credit costs remain stable and below 2%**, with no observed asset quality deterioration in key vehicle segments. * **Historical Resilience Supports Outlook:** Long-term experience (30–35 years) indicates customers typically miss a few payments but resume, reinforcing expectation that **Stage-2 accounts will not materially progress to Stage-3**. ## D. Forward Flow Trends * **Rising Momentum into GS2:** Forward flow into GS2 has accelerated from **6% to 10% QoQ**, signaling potential future pressure on GS3 if macro or seasonal disruptions persist. --- # 7. Guidance & Outlook ## A. Key Figures * **Credit Cost (Q1 FY'26):** **1.64%** of total assets (vs. 1.87% YoY, 2.07% prior Q) · **Cost to Income Ratio:** **29.29%** (vs. 27.45% YoY, 27.65% prior Q) * **Full-Year Credit Cost Guidance:** **~2%** of total assets ## B. Credit Cost Trajectory * **Sharp Improvement in Credit Costs:** Significant YoY and sequential decline in Q1 credit cost driven by lower provisioning, now tracking well below prior-year levels. * **Guidance Confirmed:** Full-year credit cost expected to stabilize around **2%**, with no intention to revise the 2–4% range downward despite strong start. ## C. NIM Exit Target * **NIM Expansion Pathway:** Full-year average NIM expected to build progressively, with **5–6% exit NIM** targeted in Q4 FY'26, supported by rate cuts and liquidity easing. * **RBI Policy Tailwinds:** **50 bps repo rate cut** and **100 bps CRR reduction** in June 2025 provide favorable backdrop for margin expansion. ## D. MSME Growth Recovery * **Confidence in 15% Growth Target:** Despite near-term moderation, management expects **recovery in MSME segment in Q2–Q3**, underpinning full-year guidance. ## E. Rural Demand Rebound * **Rural Momentum Building:** Strong Q1 performance expected to accelerate in Q2, fueled by **resilient rural economic conditions** and unmet demand for passenger vehicles. * **Construction Equipment Rebound Imminent:** Dip in financing is temporary; **significant demand recovery anticipated in August–September** as delayed projects restart.