# 1. Financial Performance ## A. Key Figures * **Net Interest Income:** **₹2,092 Cr** (+18.3% YoY, +6.0% QoQ) * **Profit After Tax:** **₹568 Cr** (+7% QoQ) * Net Interest Margin: 7.7% (+10 bps YoY) * **Cost-to-Income Ratio:** **42.7%** lending business (–0.2 bps YoY, –0.2 bps QoQ) * ROE: 13.16% annualized * Total CRAR: 20.18% ## B. Revenue & NII * **Margin Expansion Drives NII Growth:** Net interest income growth outpaced asset book expansion, supported by strong margin leverage from **pricing segmentation across borrower and asset profiles**. * **Yield Improvement:** Asset yields rose 30 bps sequentially due to favorable **product-level pricing dynamics**, particularly in commercial vehicle financing. ## C. Profit & Margins * **Efficiency Gains Accelerate:** Cost-to-income ratio improved sharply QoQ and YoY, signaling meaningful progress in **operational leverage and expense discipline**. * **ROA Distortion from Idle Funds:** Reported ROA of 94% includes **₹9,000 Cr of OFS assets**, with adjusted ROA at **2%**, reflecting drag from non-deployed capital. * **Earnings Quality:** EPS of ₹1 and book value of ₹4 per share underscore solid capital retention and earnings absorption capacity. ## D. Balance Sheet * **Strong Capital Buffer:** Total CRAR of 18% positions the company as **well-capitalized**, providing flexibility for future lending growth or stress resilience. --- # 2. Loan Book & Disbursements ## A. Key Figures * **Total Gross Loans:** **₹109,342 Cr** (Jun-25) (+2.3% QoQ, +14.3% YoY) * **Disbursements:** **₹15,171 Cr** (Q1 FY26) (-14.0% QoQ, -8.1% YoY) * Customer Base: 20.1 Mn (+5% QoQ, +20.4% YoY) * **Secured Loan Mix:** **73%** of portfolio ## B. Gross Loan Growth * **Steady Portfolio Expansion:** Loan book growth remained modest but positive on both sequential and annual basis, supported by a broadening customer franchise. * **Granular Retail Footprint:** Lending profile remains highly diversified, with **1 million customers** and an average ticket size of **₹164,000**, reinforcing retail focus. ## C. Disbursement Trends * **Flat Disbursement Volume:** Quarterly disbursements held steady sequentially despite YoY decline, pressured by softness in commercial vehicle demand. * **CV Financing Drag:** Disbursement de-growth in CV segment reflects **genuine demand slowdown in used commercial vehicles** and limited exposure to HCVs. ## D. Secured vs Unsecured Mix * **Dominance of Secured Lending:** Portfolio continues to be anchored in secured assets, including Loan against Property, Gold Loans, Auto, and Two-wheeler finance. * **Risk Discipline Maintained:** High secured mix underscores conservative underwriting and collateral-backed growth strategy. --- # 3. Segment & Product Performance ## A. Key Figures * **Loan Book Mix:** **39%** Enterprise Lending · **38%** Asset Finance · **23%** Consumer Finance * BPO Contribution: ₹14 Cr to PBT (1.9% of Total PBT) * **Customer Base:** **0.9 million** active customers added in quarter · **20.1 million** lifetime base · **10 million+** monthly active * **Avg. Loan Size:** **₹160,000–165,000** (retail-focused) * **Digital Reach:** **HDB OnTheGo app** surpasses **10 million downloads** ## B. Enterprise Lending * **Strategic Contraction:** Disbursement declines reflect deliberate pullback in unsecured business loans, while LAP shows stable growth aligned with market trends. * **Growth Focus:** Business remains centered on working capital and growth financing via a pan-India branch network, with over 80% of branches outside top 20 cities targeting 'aspirational India'. * **Product Evolution:** No plans to exit current lines; newer products in early lifecycle (2–4 years), with LAP and Enterprise Business Loans being the most mature. ## C. Asset Finance * **Volume Pressure, Margin Recovery:** Despite ~15% YoY disbursement decline due to strategic mix recalibration and seasonal weakness, NIMs are rising on higher yields, not lower funding costs. * **Market Positioning:** Focus on small transporters (1–2 vehicles) engaged in local, per-trip work, with limited exposure to large fleets, supporting differentiated risk and distribution model. * **External Headwinds:** Unseasonal rains and milder weather dampened demand for compressor-related asset financing. ## D. Consumer Finance * **Strong Customer Momentum:** Business shows robust engagement with significant customer base expansion, despite lower traction in high-ticket compressor products during seasonally strong Q1. * **Phygital Model Scaling:** Seamless digital-physical integration drives experience, evidenced by HDB OnTheGo app crossing 10 million downloads. * **Diversified Risk Profile:** No overreliance on any single product; Relationship PL accounts for 7% of AUM and is exclusive to existing customers, reinforcing retention strategy. * **Retail-Only Discipline:** Focus on small-ticket retail lending ensures structural cost advantage, with top 20 customers representing only 32% of portfolio. --- # 4. Asset Quality & Credit Costs ## A. Key Figures * Gross Stage 3 (GNPA): 2.56% (Jun-25) from 2.26% (Mar-25) * Credit Cost: ₹670 Cr (Q1 FY26) vs. ₹634 Cr (prior quarter) · 2.5% of book (Q1 seasonality) * **Provision Coverage Ratio (PCR):** **3.3%** overall, flat QoQ · **56.7%** on Stage 3 assets ## B. GNPA & Delinquencies * **Sharp GNPA Re-Classification:** Sudden rise in Stage 3 reflects portfolio re-staging rather than new legacy stress, with management confirming no residual pandemic-era asset quality issues. * **CV Segment Driving Stress:** Elevated early-stage delinquencies and Stage 2 spikes are concentrated in **commercial vehicle (CV) loans**, attributed to seasonal weakness and persistent segmental headwinds. * **Unsecured Book Stabilizing:** Unsecured business loan performance is showing signs of stabilization, though recovery outlook remains uncertain and macro-dependent. * **Collections Infrastructure Scaled:** Robust in-house collections framework with **12,500+ staff**, geo-tagged digital tracking, and centralized oversight via a dedicated Center of Excellence. ## C. Provisioning Coverage * **Provisions Adequately Calibrated:** Despite high PCR relative to secured book, management affirms coverage is risk-based, model-driven, and not excessive—reviewed quarterly at product level. * **Stable Aggregate Coverage:** Overall PCR held flat at 3% despite mix-driven declines in Stage 1/Stage 2 coverage, with changes attributed to **product-level book dynamics**, not policy shifts. ## D. Credit Cost Trends * **Credit Costs Elevated but Stabilizing:** Q1 credit cost at 5% aligns with seasonality; YoY increase of 70 bps reflects prior stress in CV and unsecured segments, with stabilization expected. * **Forward Outlook Tied to Macro:** Management sees credit costs plateauing, but future trajectory remains contingent on broader economic conditions. --- # 5. Funding & Cost of Capital ## A. Key Figures * **Borrowing Mix:** **39%** NCDs · **39%** bank loans · remainder from CPs, ECBs, Perpetual, and Subordinated debt * **Secured Fixed-Rate Loans:** **75%-76%** of loan book * **EBLR-Linked Borrowings:** **90%-95%** of bank borrowings ## B. Borrowing Mix * **Diversified Funding Sources:** Capital raised across public/private/foreign banks, mutual funds, insurers, and pension funds via multiple instruments, with risk oversight by ALCO. * **Balanced Liability Structure:** Nearly equal reliance on NCDs and bank loans, reflecting strategic diversification in funding channels. * **Relationship-Driven Terms:** Borrowing spreads negotiated individually, supported by long-standing banking relationships to secure favorable renewal terms. ## C. Funding Costs * **Cost Tailwinds Ahead:** Funding cost benefits expected from Q2 onward, providing a boost to future NIMs. ## D. EBLR Exposure * **High EBLR Pass-Through:** Majority of bank borrowings linked to EBLR—tied to repo or T-bill rates—enabling prompt capture of rate cuts. * **Repricing Dynamics:** EBLR portfolio re-prices dynamically with market conditions, enhancing margin flexibility, though sustainability of **100 bps** benefit not confirmed. --- # 6. Credit & Asset Quality Risks ## A. Commercial Vehicle Stress * **Seasonal & Structural CV Weakness:** Muted Q1 performance reflects both seasonal trends and structural headwinds, including higher vehicle prices from regulatory-driven tech upgrades like air-conditioned cabins. * **Lower Replacement Demand:** Longer deployment cycles due to improved vehicle durability are reducing replacement frequency, weighing on new CV financing demand. * **Asset Quality Under Pressure:** CV segment shows elevated stress amid rising cost of ownership and stagnant freight rates; company confirms corrective actions are underway. * **Strategic Pivot to Used CVs:** In response to stressed asset quality, firm is strategically expanding its used commercial vehicle financing business. ## B. Unsecured Loan Monitoring * **Disciplined Underwriting Framework:** Hybrid credit model combines automated scorecards for small loans with branch-level physical evaluations for larger tickets, ensuring risk segmentation. * **Granular & Adaptive Risk Systems:** Proprietary scoring engine is cycle-tested and updated using micro-market insights, enabling rapid, accurate credit decisions. * **Cautious Stance on Unsecured Lending:** Business remains selective in unsecured space; new loan book behavior has stabilized but is under close watch. * **No Broad Deterioration:** Beyond CV and unsecured business loans, no concerning asset quality spikes observed across other segments. ## C. Sector-Specific Deterioration * **Limited Concentration Risk:** Loan book remains highly diversified, with top 20 borrowers representing only **32%** of total exposure. --- # 7. Guidance & Outlook ## A. Key Figures * **NIM:** **7.7%** Q1FY26 (+10 bps) · **7.6%** Q4FY25 and Q1FY25 * Yield: 14.1–14.2% current ## B. NIM Expectations * **NIM Expansion Resumes:** Margins improved to 7% in Q1FY26, with further gains expected from Q2 as lower benchmark rates gradually reprice higher-cost legacy debt. * **Profitability Drivers:** Future earnings growth to stem from sustained NIM expansion and stabilizing credit costs, rather than Opex reductions. * **Guidance Clarity:** Management emphasized realistic yield levels (1–2%) and reiterated commitment to maintaining **7% NIM** despite macro noise. ## C. Credit Cost Forecast * **Credit Cost Stabilization:** Costs expected to stabilize in Q2 and improve thereafter, supporting a gradual rise in **ROA**. * **Risk-Adjusted Strategy:** Willingness to accept higher credit costs if offset by superior risk-adjusted returns, particularly in higher-yield segments. ## D. Macro Assumptions * **Growth Tailwinds:** Favorable monsoon and recent rate cuts to boost rural demand, private consumption, and fixed investment. * **Cautious Opex View:** No medium-term Opex guidance due to macro uncertainty, despite focus on ongoing efficiency gains. * **Positive Macro Outlook:** Management expresses optimism on near-term economic conditions, which should further support credit quality trends.