# 1. Financial Performance ## A. Key Figures * Disbursements: ₹17,917 Cr (Q3, all-time high) (+14.9% Q-o-Q) * Net Interest Income (NII): ₹2,285 Cr (+4.2% Q-o-Q, +22.1% YoY) * **Net Interest Margin (NIM):** **8.09%** (Q3FY26) (+14 bps Q-o-Q, +63 bps YoY) * **Profit After Tax (PAT):** **₹644 Cr** reported (+36% YoY) · **₹686 Cr** adjusted (+45% YoY, +18% Q-o-Q) * Gross Loan Book: ₹1,14,577 Cr (+2.8% Q-o-Q, +12.2% YoY), 74% secured * **Return Metrics:** **RoA** 2.35% (annualized, Q3) · **RoE** 13.99% (annualized, Q3) ## B. Revenue & Disbursements * **Record Disbursement Surge:** All-time high disbursements driven by **strong consumer finance momentum** and festive demand in October, offsetting prior softness. * **Growth-to-Book Lag:** Despite robust double-digit disbursement growth, book expansion remains moderated due to **large base effects and time-lag dynamics**. * **Fee Income Leverage:** Fee growth benefited from **favorable product mix** and high-volume disbursement cycle. ## C. Net Interest Income * **NII Resilience:** Net Interest Income showed modest sequential growth, supported by **margin expansion and volume accretion**, despite macro headwinds. ## D. Profitability & Margins * **Profit Acceleration:** Adjusted PAT surged **45% YoY**, reflecting strong operating leverage and **one-time provision normalization**. * **Margin Discipline:** NIM expanded meaningfully Q-o-Q and YoY, now at the **higher end of guidance**, with management prioritizing **margin stability over aggressive growth**. * **Operating Leverage:** Pre-provisioning profit rose to **₹1,611 Cr**, demonstrating scalable operations and cost control. ## E. Balance Sheet & Capital * **Healthy Book Quality:** Loan book growth was broad-based and **74% secured**, supporting asset quality resilience. * **Strong Capitalization:** Capital adequacy remains robust at **18.1%**, with diversified funding and **positive liability-asset mismatch profile** across key tenors. --- # 2. Loan Book & Asset Quality ## A. Key Figures * **Secured Loan Mix:** +50 bps QoQ (+>90 bps over two quarters) * Stage 1 Asset Quality: 95.22% * Gross Stage 3 NPA Ratio: 2.81% (stable QoQ) * **Credit Cost:** ₹712 Cr Q3FY26 (↓ from ₹748 Cr) * Provision Coverage Ratio: 55.59% for Stage 3 loans ## B. Portfolio Composition & Risk Shift * **Improved Secured Exposure:** Continued shift toward secured lending reflects risk discipline and portfolio derisking over recent quarters. * **Unsecured MSME Stress Easing:** Portfolio health in stressed unsecured MSME segment shows early recovery signs, with **slight contraction (~1%)** and stabilizing delinquencies. ## C. Delinquency & Recovery Trends * **Stronger Early-Stage Performance:** Stage 1 improvement to 22% signals healthier new loan performance and effective underwriting. * **Recovery Momentum:** Decline in gross Stage 2 loans driven by **positive recoveries** across Enterprise, Asset, and Consumer Finance segments. * **Yield Retention Impact:** Book growth lags disbursements due to **higher prepayments** and a **deliberate recovery pullback**, benefiting Stage 1+2 metrics. ## D. Slippages & NPA Management * **Persistent CV/CE Pressure:** Net slippages remain elevated, concentrated in **CV/CE segment**, though broader portfolio shows improvement. * **Slippage Trend Moderating:** Rates declined slightly QoQ but remain high; management targeting further reduction. * **Value-Accretive NPA Sales:** ARC transaction focused on **older, written-off, small-ticket accounts** (LAP, CD); deemed **cost-effective** and **cash-generative**, with potential for future similar sales. --- # 3. Funding & Cost Structure ## A. Key Figures * **Cost-to-Income Ratio (Lending):** **39.5%** in Q3FY26 · **40.9%** YTD Dec-2025 * Cost-to-asset Ratio: 3.7% (ex-one-time impact) * Employee Benefit Expense Impact: ₹60.52 Cr (Q3 & 9M FY26) from new labour codes, with ₹56 Cr of ₹61 Cr total impact in lending ## B. Cost of Borrowings * **Stable Funding Costs:** Borrowing costs down marginally, with stability expected near-term despite hardened market rates and rising bond yields limiting rate cut pass-through. * **Active Liability Management:** Ongoing optimization of borrowing mix across NCDs and term loans; majority of term loans linked to **EBLR**, ensuring benchmark transparency. * **Foreign Borrowing Dynamics:** ECBs represent 11% of debt, fully hedged with zero FX impact; foreign funding seen as **relatively expensive** outside select RBI windows.[B] * **Commercial Funding Practices:** Borrowings from HDFC Bank conducted at arm’s length, with no disproportionate reliance or preferential terms. ## C. ECB Hedging Strategy * **Full FX Protection:** Entire ECB book is fully hedged, effectively converting foreign debt into a **fixed-cost obligation** with no currency volatility exposure. ## D. Opex & Cost-to-Income * **Efficiency Improvement:** Lending cost-to-income ratio improved to 5% in Q3, supported by disciplined opex management despite a one-time gratuity impact. * **Branch Rationalization:** Ongoing footprint optimization through rapid closure or relocation of underperforming branches, enhancing cost efficiency. * **Cost Discipline Embedded:** Strong organizational culture of cost-consciousness, with all investments evaluated on an **IRR basis**, reinforcing structural profitability. ## E. Labour Code Impact * **One-Time Charge Recognized:** Full provision of **₹61 Cr** taken for new labour codes, treated as past service cost under IND-AS 19, with actuarial validation and no partial accruals. * **Evolving Regulatory Landscape:** Final rules pending; while known liabilities are fully provided, management acknowledges uncertainty on potential future recurring costs. --- # 4. Segment & Product Performance ## A. Key Figures * Consumer Finance Book: 17.3% Q-o-Q growth * **CV Disbursement Growth:** **4%** * Gold Loan Book: 17.8% Q-o-Q growth ## B. Consumer Finance Growth * **Festive & Policy-Driven Momentum:** Consumer finance growth fueled by seasonal demand and **GST cuts on auto and 2-wheeler loans**, with sustained momentum expected. * **Mixed Impact of GST:** While GST reductions boosted demand, they also led to **lower auto loan ticket sizes** due to reduced vehicle prices, though no clear de-premiumisation trend was confirmed. * **Customer-Centric Philosophy:** Strategy emphasizes serving aspirational India through a broad product suite and lifecycle management, prioritizing **profitable customer needs** over reliance on single products. ## C. Vehicle & Asset Finance * **CV Volume-Driven Growth:** Commercial vehicle disbursements rose modestly, tracking industry volume trends, but lagged behind **industry retail sales growth of 17%**, raising competitive positioning questions. * **Used CV Weakness Offset by New Sales:** Sequential growth in new CV sales (+4%) contrasted with used CV decline, attributed to seasonal demand and pricing delays; long-term 50-50 balance target remains intact. * **ATS Resilience Despite Price Cuts:** Average ticket size increased in autos and 2-wheelers, driven by **strong festive volumes** and potential **premiumisation**, outweighing deflationary GST impacts. * **Selective Segment Participation:** Company maintains disciplined underwriting, avoiding low-yield segments even if they show volume growth, aligning with return-focused strategy. ## D. Unsecured & Secured Lending Trends * **Unsecured Growth Focus:** Relationship Personal Loans and unsecured Business Loans are strategic priorities for future top-line expansion. * **Gold & LAP Stability:** Gold loan book delivered strong quarterly growth, while enterprise lending (LAP, Business Loans) showed moderate expansion and **stabilizing asset quality** in unsecured business portfolios. --- # 5. Credit & Operational Risks ## A. CV/CE Asset Quality * **Stabilization in Stressed Segments:** Signs of stabilization in CV/CE asset quality in Q3 after prior weakness, as expected. * **Mixed Delinquency Trends:** CV finance shows divergence—elevated 90+/120+ DPD levels persist, but **1–90 DPD recovery has improved** due to proactive collections. * **Collection Gains:** Early-stage collection efficiency in the CV portfolio has strengthened, supporting delinquency containment. * **Technology as Strategic Imperative:** Leadership underscores that continuous tech evolution demands sustained investment and adaptation across customer engagement and operations. ## B. Monsoon & Cyclone Impact * **Seasonal Utilization Dip:** Monsoon-driven decline in vehicle utilization—daily km drops from **200 to 150–160 km**—weighs on Q2 asset productivity and repayment capacity. * **Cyclone-Related Operational Drag:** Southern India cyclones may exert lagging pressure on CV/CE asset performance, though full impact remains unquantified. ## C. Delinquency Trends * **Reduced Delinquency Flow-Through:** Retail business has successfully curbed the progression of delinquencies into deeper buckets, a continued strategic focus. * **Stronger On-Time Payments:** Improvement in 0 DPD performance reflects fewer initial payment slippages, aided by the "X bucket" strategy and early collections. ## D. Regulatory Uncertainty * **Resilient Macro Backdrop:** Real GDP growth held firm with benign inflation during the festive quarter, despite global headwinds. * **External Risks in Focus:** Geopolitical tensions and global trade uncertainties remain key watchpoints for future credit conditions. --- # 6. Guidance & Outlook ## A. Growth Trajectory & Market Opportunity * **Confident Medium-Term Outlook:** Management maintains confidence in achieving **18% to 20%** book growth despite rising competition, citing ample market opportunity over a 3–5 year horizon, potentially extending to 10–15 years. * **Festive Demand Boost:** Strong consumption during the festive season, supported by favorable policy and expected robust harvest, underpins near-term domestic demand momentum. * **Growth Resumption in MSME Segment:** Unsecured MSME book poised for growth resumption in the next couple of quarters after stabilization, with business loans also expected to return to positive growth under tightened underwriting. * **Industry Stress Stabilizing:** Early signs of stabilization in unsecured business loan stress across the sector are bolstering management’s confidence in restarting growth initiatives. ## B. Margin & Pricing Dynamics * **Stable Margin Outlook:** Price deflation has been minimal; margin strategy is aligned with optimal product mix, avoiding a significant margin-growth trade-off. * **Path to Healthier Margins:** Sustained unsecured loan growth and stable interest rates are key enablers for improved margin performance going forward. ## C. Credit Cost Guidance * **Credit Costs Set to Improve:** Management expects gradual quarter-on-quarter stabilization and improvement in credit costs, targeting a long-term run rate **10 to 20 bps lower** than current levels, subject to macro conditions.