IndoStar Capital Finance is a retail lender that was built by buying and transforming a corporate-finance company - it now puts almost all its money into financing used trucks, tractors and cars for small-business owners in India’s smaller towns. The pivot began in 2016 when management started deliberately shrinking the legacy corporate book, and it accelerated with the purchase of a commercial-vehicle finance business in 2018 and a large capital injection from Brookfield in 2020 - Brookfield’s first private-equity bet in India and its first in a listed NBFC. The recurring approach is to lend against hard assets that are easy to value and resell, keep loan-to-value ratios conservative, and use a branch network in Tier-3 to Tier-5 towns to reach borrowers that banks often miss - a formula it is now replicating in a small-ticket loan-against-property business launched in 2024. # Business segments Two lending engines at different stages - a used-vehicle finance franchise that generates nearly all the assets, and a micro mortgage business that is being built inside the same branches - plus a legacy corporate book that is being wound down. ## 1. Vehicle finance: the used-truck engine that funds the company **It lends to transport entrepreneurs and farmers buying second-hand commercial vehicles, cars and tractors, with almost the entire book secured against assets that are already on the road.** - **Used, not new** - 99% of CV disbursements are for used vehicles, and the company will fund a commercial vehicle up to 12 years old, which means it operates in a market where half or more of financing still comes from unorganised moneylenders charging higher rates. - **Secured against hard assets** - the average loan-to-value ratio is about 75%, so the borrower has meaningful skin in the game, and the underlying vehicle can be repossessed and resold if the loan goes bad. - **Four wheels, many shapes** - the portfolio spans medium and heavy trucks (37% of the book), small commercial vehicles and pick-ups (22%), passenger cars (20%), construction equipment like backhoe loaders and excavators (10%), and farm equipment such as tractors and harvesters (6%). - **Small-town distribution is the moat** - 454 branches across 24 states, with more than 70% located in Tier-3 to Tier-5 towns where the company claims a first-mover advantage and where a referral-led salesforce of about 1,700 people sources customers who often have no formal credit history. - **Credit quality is being dialled up** - the share of disbursements going to customers with a CIBIL score above 725 rose from 63% to 79% over two years, while exposure to first-time borrowers fell from 13% to 4%, a shift driven by proprietary scorecards and a new data-science team. ## 2. Micro LAP: the small mortgage bet being built on the same shelf **It makes loans of about ₹7.5 lakh against residential property to tea-stall owners, mechanics and vegetable traders, using the vehicle-finance branch network to keep costs low.** - **Tiny ticket, low risk** - the average loan-to-value ratio is below 40%, meaning the property backing the loan is worth more than twice the amount lent, and the typical tenure is around seven years. - **Piggybacking on the vehicle network** - the product is sold out of 108 existing vehicle-finance branches across four states, with a dedicated team of about 500 people, so the company avoids the cost of building a separate distribution channel. - **Fully digital from day one** - the entire process is paperless, with near-100% adoption of electronic signatures and automated bank mandates, and the credit engine runs on CRIF bureau data for Micro LAP while vehicle finance uses CIBIL scores. - **A diversification play, not a replacement** - at ₹175 crore of assets it is still tiny next to the vehicle book, but it gives the company a second secured-lending product that can grow inside the same branch footprint without a big step-up in costs. ## 3. Legacy corporate and SME lending: the book being run off **This is the original business the company was founded on - loans to mid-sized corporates and SMEs - and it is being deliberately shrunk through asset sales and zero new disbursements.** - **Corporate lending is down to a stub** - the corporate loan book has fallen from over ₹4,600 crore in 2019 to about ₹156 crore, with a large chunk sold to an asset reconstruction company in August 2024. - **SME loans are in runoff** - no fresh SME disbursements were made in the last reported year, and the portfolio has been reduced through sales to reconstruction companies, consistent with an older “build-and-sell” model where the company would originate secured loans and then sell the pool to banks. - **Security receipts remain on the books** - about ₹1,608 crore of security receipts from past stressed assets are still being worked out, with roughly 30% of the original exposure recovered so far and a provision cover of about 63% taken against the pool. # Group structure and partners **IndoStar is a professionally managed, institutionally owned NBFC with two large financial sponsors and a simplified structure after the sale of its housing-finance subsidiary.** - **Brookfield and Everstone call the shots** - Brookfield holds 56% and Everstone holds 14%, making this a promoter-driven company where the promoters are global asset managers rather than a founding family. - **The housing-finance exit was a defining deal** - the wholly-owned affordable-housing subsidiary was sold to an EQT affiliate in mid-2025 for ₹1,705.95 crore, freeing up capital that management says will be redeployed into vehicle finance and the new Micro LAP business. - **No joint ventures, no associates** - the group is a single listed parent with two wholly-owned operating subsidiaries, IndoStar Home Finance Private Limited and IndoStar Asset Advisory Private Limited.