# 1. Financial Performance ## A. Key Figures * **Disbursement:** **₹934 Cr** Q2 FY'26 · **₹280 Cr** Q1 FY'26 * **Net Interest Income (NII):** **₹91 Cr** Q2 FY'26 · **₹341 Cr** Q2 FY'25 (-73%) * Portfolio Yield: 19.6% Q2 FY'26 (+20 bps QoQ) · NIM: 8.4% (+20 bps QoQ) * **Net Loss:** **₹249 Cr** Q2 FY'26 * CRAR: 47% (Sep) · Net Worth: ₹2,227 Cr · Gearing Ratio: 1.5x * **Liquidity:** **₹1,179 Cr** (21% of assets) · **Cash & Bank Balances:** **₹1,270 Cr** (Oct) ## B. Revenue & Disbursements * **Strong Lending Rebound:** Disbursements surged to near ₹1,000 Cr in Q2 after a weak Q1, with seasonal dip in October expected to reverse in November–December. * **Active Customer Base:** A meaningful portion of the eligible base—**7%**—received fresh disbursals in H1, signaling targeted reactivation. ## C. Net Interest Income * **NII Under Pressure:** Sharp YoY decline in NII driven by AUM contraction and interest reversals from assets turning GNPA. ## D. Margins & Profitability * **Margin Recovery in Progress:** Portfolio yield and NIM doubled QoQ, supported by higher-yielding new loans; further expansion expected as mix shifts. ## E. Balance Sheet Strength * **Robust Capitalization:** CRAR at 47% post-rights issue provides strong buffer and capacity for future AUM growth. * **Funding Confidence:** Recent debt raise of **₹598 Cr** and continued access to external funding underscore market confidence. * **Liquidity Well Covered:** Despite losses, all liabilities are being met; liquidity reserves remain at **5–3x** internal thresholds. ## F. Cash Flow Position * **High Cash Flexibility:** Elevated cash balances (₹1,270 Cr) enable rapid deployment into new lending opportunities. * **Quarterly Liquidity Flow:** Started Q2 with ₹1,731 Cr in liquidity, funded via collections, **₹160 Cr** borrowings, and **₹200 Cr** from rights issue, ending at ₹1,179 Cr. --- # 2. Loan Book & Asset Quality ## A. Key Figures * **AUM:** **₹4,088 Cr** (Q2 end) (+growth trend) * GNPA: 5.62% enterprise · 4.97% standalone * NNPA: 1.17% enterprise · 0.97% standalone * **Slippages:** **₹552 Cr** (Q1) · **₹396 Cr** (Q2) * X-bucket Collection Efficiency: 97.9% (June) → 98.7% (Sept) → 98.5% (Oct) ## B. AUM Growth Trends * **Strong AUM Expansion:** Loan book growth driven by increased disbursements, with continued momentum expected. * **Affiliate Contribution:** Criss Financial contributed **~₹230 Cr** AUM in prior year’s Q4, with updated figures pending. ## C. GNPA & NNPA Levels * **High Provisioning Coverage:** Loan book remains **80% provisioned**, supporting resilience despite elevated NPA levels. * **Divergent Risk Profiles:** Standalone entity shows significantly higher GNPA and NNPA versus consolidated, indicating concentration of stressed assets at the core level. ## D. Slippages & Write-offs * **Elevated Technical Write-offs:** Recent quarters saw **₹86 Cr in technical provisions** due to active write-off strategy, separate from **₹418 Cr** in reported write-offs. * **Recovery Continuity:** Write-offs are **technical, not prudential**—recovery efforts remain ongoing via field teams. * **Declining Slippage Trend:** Sequential reduction in slippages reflects improving underwriting or collection traction. ## E. Collection Efficiency * **Portfolio Recovery Momentum:** Microfinance segment shows sustained improvement with **9% collection rate** maintained into October. * **Geographic Performance Convergence:** Lagging regions like **Karnataka** now at par with national average; top 5 AUM states show consistent improvement. * **Short-term Seasonal Dip:** X-bucket efficiency decline in October attributed to **festive season, rains, and regional floods**, not structural issues. --- # 3. Product & Segment Performance ## A. Key Figures * **Total Portfolio:** **₹671 Cr** (AP, Telangana, six states) · **Micro LAP Book:** **₹290 Cr** (<1% NPA) * **Secured Loan Mix:** **39–40%** current (vs. 13% YoY) · Target: **50–55%** by year-end * **FY’26 Disbursals:** **28%** of Sep balance sheet · Projected **37%** by end-Oct ## B. Micro LAP Growth * **Strategic Expansion:** Micro LAP is the primary growth engine, with **accelerated scaling** across six states and best-in-class asset quality. * **Portfolio Rebalancing:** Shift toward secured lending accelerating; Micro LAP to drive increased share in total book amid **declining emphasis on unsecured loans**. ## C. Portfolio Yield Trends * **Pricing Power:** Group loan pricing now at **26% interest + 5% processing fee**, reflecting strategic rate hikes and improved risk-based pricing. * **High-Quality New Book:** FY’26-originated loans show **strong early performance**, with only **1% delinquency**, supporting yield sustainability. ## D. Secured Lending Shift * **Structural Transformation:** Secured lending nearly tripled YoY, targeting a **70–30 secured-to-unsecured ratio** long-term, de-risking the balance sheet. --- # 4. Branch & Operational Efficiency ## A. Key Figures * **Branches Closed/Merged:** **101** in H1 FY'26 * **Micro LAP Branches:** **100** operational, showing improved productivity * Collection Efficiency: >99% X-bucket achieved in over 60% of branches * **State Balance Sheet Share:** **Madhya Pradesh** increased from **12% to 14%** ## B. Branch Rationalization * **Operational Streamlining:** Significant footprint optimization through closure or merger of 101 branches, driving expected structural improvements in cost efficiency. * **Focused Network Growth:** Micro LAP’s 100-branch network delivering enhanced productivity, positioned to fuel strong future loan growth. ## C. Loan Officer Productivity * **High Collection Standards:** Strong operational discipline reflected in robust collection efficiency across majority of branches. * **Tech-Driven Efficiency:** Sustained productivity gains per loan officer, supported by digital underwriting tools and performance focus in high-output branches. ## D. Digital Collections * **Digital Recovery Channels:** Deployment of QR codes, SMS reminders, and BBPS integrations enhancing collection effectiveness and customer interaction. ## E. Geographic Performance * **Mixed Regional Trends:** While most states align with national collection benchmarks, Bihar faces near-term pressure from elections despite stable disbursement controls and October resilience. * **Outperforming Regions:** Madhya Pradesh shows strong collection performance and growing balance sheet contribution, signaling successful regional scaling. * **Challenges & Recovery:** Andhra Pradesh temporarily lags due to natural disruptions, though recovery trajectory remains intact. --- # 5. Customer & Credit Policy ## A. Key Figures * **New Customer Enrollment:** **22%** of total (up from 15% in Q1) * **Rejection Rates:** **~80%** for new customers · **~65%** for existing customers * **Borrower Profile:** **72%** had <2 lender relationships (FY '26) · **1.8%** in 1–30 DPD at disbursement * **Eligible Disbursement Pipeline:** **₹6,000 Cr** opportunity from **10 lakh customers** ## B. New Customer Acquisition * **Accelerating Onboarding:** Significant increase in new customer enrollment, with plans to further scale in underpenetrated "white" and "green" geographies. * **Productivity Focus:** Growth outlook hinges on improving loan officer-level productivity and reversing prior borrower base decline from Q3 onward. ## C. Rejection Rate Drivers * **Stringent Filters Drive High Rejections:** Rejection rates remain elevated due to internal credit standards exceeding regulatory norms, including zero tolerance for new customer delinquency. ## D. Borrower Quality Filters * **Conservative Risk Posture:** Credit policies enforce stricter delinquency thresholds (30 DPD vs. SRO’s 60 DPD), ensuring high portfolio quality and low multi-lender exposure. * **Delinquency Decline Trend:** Targeted acquisition of low-levered customers (1–2 loans) is driving improved collection efficiency and downward delinquency trends. ## E. Eligible Customer Pipeline * **Large Untapped Upside:** Deep pipeline of **10 lakh eligible customers** supports near-term disbursement growth, with majority having minimal loan exposure and strong repayment behavior. --- # 6. Credit & Collection Risks ## A. Key Figures * **Legal Recoveries:** **₹7.7 Cr** recovered since August from **90,000 demand notices**, **3.3 lakh legal notices**, and **8,600+ Lok Adalat cases** * 90+ DPD Inflows Guidance: **≤₹150 Cr** expected this quarter, signaling portfolio stabilization ## B. Flood & Seasonal Impact * **Regional Disruptions:** Collections softened in October due to **festive seasonality and floods** in Andhra Pradesh, Bihar, Odisha, and West Bengal, though Madhya Pradesh remained unaffected. * **Segment Divergence:** Unsecured individual loans showing **weaker portfolio quality** amid flood stress and attrition, underperforming the more resilient Micro LAP segment. ## C. Over-Leveraged Borrowers * **Industry Improvement:** Signs of declining over-leveraged borrowers across the sector, reflecting better credit discipline and data sharing. ## D. Legal Recovery Efforts * **Aggressive Collections:** Large-scale legal outreach underway, with material recoveries already realized and **CGFMU route under active review** for high-loss pools (>5% loss rate). ## E. Portfolio Migration Risks * **Stabilizing Trends:** Forward-looking indicators suggest **flows into 90+ DPD remain contained**, supporting expectations of sustained credit quality improvement. --- # 7. Guidance & Outlook ## A. Key Figures * **Disbursement:** **>₹500 Cr** current quarter · **>₹700 Cr/month** next quarter run rate * **PPOP:** **-₹40 Cr** in quarter · expected to turn **positive** in upcoming quarters ## B. Disbursement & Growth Trajectory * **Accelerating Disbursement Run Rate:** Momentum building despite industry-wide customer acquisition headwinds, signaling operational recovery and **improved IT infrastructure effectiveness**. * **AUM Inflection Ahead:** Sequential improvement expected from Q3 onward, with meaningful expansion anticipated in FY '27 on **higher-quality loan book buildout**. ## C. Credit Quality & Asset Performance * **Credit Cost De-Risking Underway:** Improving collection efficiency (**>99% projected**) and lower migration to delinquency reflect tightening underwriting and portfolio stabilization. * **GNPA Pressure Easing:** Expected decline in non-performing assets to support margin recovery and **sustainable profitability turnaround**. ## D. Profitability Outlook * **Path to Positive PPOP:** Structural cost rationalization and volume leverage to drive exit from negative profitability, marking a **key inflection in earnings trajectory**.