MAS Financial Services Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Growth engine re-firing: AUM grew 6% QoQ (vs 4% in Q2), driven by festive demand and a marked improvement in eligible borrower quality; management expects to return to a 20-25% growth trajectory within a couple of quarters.
• Asset quality is stable, not deteriorating: Net Stage 3 held at 1.72% with a maintained management overlay of INR17.60 crores; early DPD buckets improved, though later buckets saw a marginal uptick that management attributes to borrower behaviour, not collection weakness.
• Deliberate slowdown in CV, compensated by 2-wheeler: Management consciously slowed commercial vehicle lending after spotting stress in small-ticket used LCVs in Rajasthan and MP; 2-wheeler growth filled the gap, helped by a mature tech stack and festive season.
• Profitability levers are intact, opex is structural: Cost-to-income stabilized at ~36%, with the sharp opex rise explained by fintech partnership accounting (revenue share booked as expenditure); ROA strategy targets 2.75-3% with NIMs of 7-8% and credit cost of 1-1.5%.
• What to watch next quarter: Whether the CV growth recovery materialises as guided, the pace of housing finance acceleration toward 30-35%, and any change in the provisioning coverage ratio given the uptick in later DPD buckets.

Growth Trajectory & Demand Environment

• Festive quarter delivered: AUM growth accelerated to 6% QoQ from 4% in Q2, with MSME, MEL and SME registering good growth both sequentially and year-on-year, followed by wheels (2-wheeler and commercial vehicle).
• Eligible demand improving: Management observed a marked improvement in eligible demand at the ground level, driven by better borrower quality rather than any relaxation in underwriting; approval ratios have risen from 14-15% to around 20% over the last 2-3 quarters.
• Growth philosophy is calibrated: The stated objective is 20-25% growth (doubling AUM every 3 years), but management explicitly acknowledges that growth is not solely determined by market forces and that the common denominator for any problem in lending has been growth.
• SME and wheels will lead: SME and wheels are the focus areas expected to contribute more to growth going forward, while MEL and SPL will continue to contribute steadily; used cars are still 2-3 quarters away from achieving critical mass as a distinct product.
• Branch expansion to resume gradually: Branches have stabilised at 208, growing at a lesser pace than anticipated at the start of the year; management plans to increase branches gradually, with Uttar Pradesh (5-6 branches) and a deeper southern network planned for next financial year.

Kamlesh Gandhi: "we are seeing a marked improvement at the ground level in eligible demand, and this will, as per our understanding and experience of all these years, will gradually improve over the next 2 to 3 quarters, giving us an opportunity to come back to a trajectory of around 20% to 25% growth once again."

Asset Quality: Stability with Pockets of Watchfulness

• Headline stability: Net Stage 3 remained stable at 1.72%, with housing finance asset quality described as very benign at 0.67% net Stage 3.
• Early DPD improvement: 30-day and 60-day DPD buckets improved, attributed primarily to borrower behaviour (increasing capability and intent to pay) rather than any change in collection practices, though adoption of new collection methods continues.
• Later DPD uptick: Stage 3 assets rose marginally to 2.61% from 2.58%, and later DPD buckets (90 days and beyond 120 days) showed an uptick; management did not voluntarily increase provisioning beyond what the Ind AS ECL model dictates, citing 5-year historical data showing that 90 DPD does not necessarily mean loss for NBFC borrowers.
• Provisioning coverage declined mechanically: Stage 3 provisioning fell to 39.9% from 41.3% because the ECL calculation varies quarter-to-quarter based on collection recoveries from the 90 DPD bucket; a management overlay of INR17.60 crores from COVID times remains maintained and unused.
• Sector-level caution: FMCG still shows some slowdown with no marked improvement and is kept under caution or on a negative list; agro is going through a temporary cycle in certain geographies like MP (agri-related mandis, APMCs) with slight elevation in MSME monthly par data, though nothing too concerning; gems and jewellery has not been funded for a very long time.
• Textile opening up: Textile is opening up in Gujarat; management is positive on Gujarat, Rajasthan and Maharashtra from this quarter onwards, though still not keen on opening in South India for textile.

Dhvanil Gandhi: "I'll attribute this majorly to the borrowers' behavior of their increasing capabilities to pay on time."

Segment Dynamics: CV Slowdown, 2-Wheeler Surge, SPL Constraint

• CV growth was negative QoQ by design: Management took a conscious call to slow down commercial vehicle lending after early signals of stress emerged in certain pockets (Rajasthan, MP) and specifically in the small-ticket used light commercial vehicle segment; data scrubs also revealed overlap between MSME borrowers and CV borrowers, reducing the urgency to grow CV faster.
• 2-wheeler filled the gap: The slowdown in CV was compensated by strong 2-wheeler growth, which got a good advantage from a well-developed tech stack (real-time approval and real-time disbursements now live) and the festive season.
• SPL kept deliberately conservative: Salaried personal loans grew only marginally QoQ because the product has scaled up over 8-10 quarters and management is deliberately keeping it conservative; it currently stands at 8.5% of total AUM, with headroom below the 10% upper ceiling.
• Housing finance grew 23%, below ambition: The housing finance subsidiary grew at 23% instead of the desired 30-35%, but maintained net Stage 3 of 0.67% and grew profit in excess of 25%; management is confident that increasing distribution strength and market understanding will bring growth back to the 30-35% range within a quarter or two.
• CV recovery expected: Management expects CV growth to start slowly inching up and returning to normal in the next 2 quarters.

Distribution & Liability Strategy

• NBFC distribution model resilient: Distribution through NBFCs (33-34% of the mix) stands in good state despite headwinds of the last 1-1.5 years; this is a 15-year-old model that continues to perform.
• Direct retail shift underway: The percentage mix over a few quarters might change in favour of direct retail, moving from the current split to around 70:30 or 75:25; direct distribution continues to grow steadily and robustly.
• Liquidity position secured: The company has tied up for liquidity up to September FY27; by March it should be in a position to tie up for the whole year.
• Cost of borrowing reduction a priority: Management sees reducing the cost of borrowing as a challenge to improve both profitability and affordability for borrowers; a similar reduction is expected in the current quarter.
• Off-book AUM target: The strategic goal is to maintain 20-25% of AUM as off-book through direct assignment and co-lending; INR850 crores of direct assignment transactions were executed during the December quarter, along with a securitisation tranche of around INR100 crores (PTCs) subscribed by HDFC Mutual Fund.
• Long-term borrowing raised: INR670 crores through term loans with average maturity of 3-5 years, and INR250 crores through NCDs.

Technology & Underwriting Evolution

• LOS and BRE live across products: The loan origination system for all products is up and running; the business rule engine for all major products is up and running; a second round of tweaking is underway to fine-tune scorecards based on back-testing historical data with the in-house data science team.
• 2-wheeler tech stack mature: Real-time approval and real-time disbursements are now happening for 2-wheeler, which contributed to the segment's strong quarter.
• SME scorecards in development: Work is ongoing on scorecards for SME, focusing on products with high data availability.
• Embedded finance pilot: The company is piloting an embedded finance product.
• MEL ticket size ambition: Within the next 2 to 3 years, the annual ticket size for MEL should move closer to INR3-4 lakhs.

Profitability & Capital Management

• Cost-to-income stabilised: Operational expenditure stabilised QoQ at around 36% cost-to-income ratio and is expected to hover around that percentage; the sharp opex rise is largely explained by fintech partnership accounting, where the complete interest is first booked as income and the revenue share paid to fintechs is taken as expenditure.
• ROA-driven strategy: Management will focus on ROA, targeting 2.75% to 3%, with NIMs between 7% to 8%, credit cost of 1% to 1.5%, and operational cost of 2.5% to 3%, varying by product configuration.
• Capital consumption slightly higher: Slightly higher capital adequacy consumption this quarter was due to the off-book portfolio assigned to banks being lower by percentage, requiring a capital buffer.
• Capital raise threshold: Historically, Tier 1 on AUM of around 18% is the level at which management starts thinking about a capital raise, though no commitment was made on exact timing.
• Interim dividend declared: An interim dividend of INR1.25 per share (face value INR10) was declared for December.

Kamlesh Gandhi: "25%, Hardik, it's doubling your AUM every 3 years. In lending business, we have seen over all these 30 years that the common denominator for any problem has been growth."

Guidance & Commitments

Key Metrics