# 1. Financial Performance ## A. Key Figures * **PAT:** **₹31 Cr** Q2 (profitability restored) * Total Yield (IRR): Increased from 19.64% Q1 to 20.32% Q2 * **Balance Sheet Size:** **₹3,731 Cr** (AUM-driven growth) * **Business Volume Guidance:** **₹800–850 Cr** projected for Q3 ## B. Revenue & Disbursements * **Top-Line Catalyst:** Imminent closure of **debt assignment (DA) transactions** with major investors set to drive exponential revenue growth despite modest AUM contraction. ## C. Net Interest Income * **Yield Expansion Underway:** Average yield improved on the back of **reduced co-lending** (from 50% to 20–25%) and **risk-based pricing**, boosting net interest income. * **NII Growth Trajectory:** Interest income growth and rising yields expected to accelerate **NII and top-line expansion** in Q3, supported by strong volume outlook. ## D. Profitability Metrics * **Return to Profitability:** Q2 marked a turnaround from Q1 losses, achieving **₹31 Cr PAT** amid adverse macro conditions, aided by lower impairments and operating leverage. * **Opex Pressure & Outlook:** Q2 opex rose due to **sourcing incentive programs**; productivity gains and prior hiring expected to improve efficiency and support margin resilience from Q3. ## E. Balance Sheet Strength * **Capital Position Stable:** CRAR remains healthy post-capital infusion, supporting balance sheet expansion to **₹3,731 Cr** and enabling future growth initiatives. --- # 2. Loan Book & Asset Quality ## A. Key Figures * GNPA: 6.46% with interest accrual (₹212 Cr) · 93.54% POS * NNPA: 3.07% with interest accrual · 2.46% POS * **Slippages:** ₹46 Cr Q1 → ₹42 Cr Q2 · **5%–7%** annualized on direct AUM * Recoveries: ₹7.73–8 Cr in Q2 vs. ₹3–6 Cr previously * PCR: 60% (Stage 3 NPAs) · CRAR: 22.02% · Debt/Equity: 4.56x ## B. GNPA & NNPA Trends * **Asset Quality Stabilizing:** Despite elevated GNPA/NNPA levels, Q2 showed marked improvement over Q1, with expectations of further recovery in H2. * **No Denominator Effect:** AUM remained flat QoQ, confirming that rising NPA ratios were not due to portfolio shrinkage but reflect genuine credit stress. * **Segmental Divergence:** Dealer channel accounts for **84%** of NPA contributions, while 4-wheeler GNPA remains high at **72%**, indicating concentration risk in key segments. ## C. Slippages & Recoveries * **Improving Credit Flow:** Sharp reduction in slippages and **69% increase in collections/normalizations** signal stronger underwriting and recovery execution. * **Q1 Was an Outlier:** Management attributes prior weakness to temporary factors; Q2’s lower slippages and higher recoveries reflect a return to trend. * **Slippage Rate Declined:** Despite growing AUM, slippage rate as % of standard portfolio fell from **9.91% to 6.7%**, indicating better portfolio discipline. ## D. Provisioning Coverage * **Conservative Impairment Policy:** Company maintains **60% PCR from Day 1** on NPAs under ECL, exceeding RBI’s IRAC norms with **14% ECL vs. 2% required**. * **Impairment Costs Fell Sharply:** Dropped to **0.5% in Q2** from 43% in Q1, aided by lower management overlay and improving asset quality. * **Provision Reversals Possible:** If NPAs decline, excess provisions must be reversed—creating potential for future earnings uplift. --- # 3. Funding & Cost of Capital ## A. Key Figures * Cost of Funds: Reduced from 9.94% to 9.69% ROA * **Funding Facility:** **INR 504 Cr** secured in Q2 * Rate Reductions: NCDs ↓ 0.24 pp, CP rates ↓ 0.12 pp, bank loans ↓ 0.24 pp * Fixed Deposits: Book grew to INR 46.07 Cr, with INR 7.52 Cr new and INR 2.91 Cr renewed in Q2 ## B. Cost of Funds * **Improved Funding Efficiency:** Significant reduction in cost of funds achieved despite lower-than-expected volume growth, reflecting structural improvements in funding terms. * **Broad-Based Cost Reduction:** Favorable renegotiations across all major instruments—NCDs, CPs, and bank loans—drove down overall borrowing costs. ## C. Funding Mix * **Diversified Sources:** Funding base broadened across term loans, NCDs, securitization, and CP markets, with a strategic pivot from high-cost NCDs to lower-cost bank term loans. * **Stable Ownership Structure:** Promoter holding maintained at **62%**, with **28% retail ownership**, supporting investor confidence and capital stability. ## D. Debt & Equity Ratio * **Capital Strengthening:** Successful closure of Tier 2 sub-debt round with PhillipCapital enhances capital adequacy and supports future leverage capacity. --- # 4. Product & Segment Performance ## A. Key Figures * **2-Wheeler Financing:** **₹2,936 Cr** (Q2) (+40%) * **Used 4-Wheeler Portfolio:** **₹118 Cr** (Q2) (+133%) * **AUM:** **₹2,995 Cr** (+40% YoY, +1% QoQ) * **Loyalty Loan Portfolio:** **₹44 Cr** (Q2) (+300%) * **CV Portfolio:** **₹140.12 Cr** (Q2) (+614%) ## B. 2-Wheeler Financing * **Core Growth Engine:** 2-wheeler financing delivered strong double-digit volume expansion, reinforcing its role as the primary growth driver. * **Pricing Discipline:** Risk-based pricing now fully implemented, enabling differentiated yields across customer risk tiers and improving portfolio quality. * **Yield Enhancement:** 2-wheeler loan yields rose to **22%** in Q2, with broader blended yield at **35%** and further **100–500 bps increases expected from Q3**. ## C. Used Vehicle Growth * **Used Car & CV Momentum:** Used 4-wheeler and CV financing showing rapid uptake, with **used car GNPA at 2%** and **CV GNPA at 31%**, both below 2-wheeler levels. * **Delayed Launch, Q4 Impact:** Used 2-wheeler financing postponed to end of Q3; minimal Q3 contribution expected, with meaningful ramp-up only in **Q4 and beyond**. * **Strategic Scale Target:** Used 2-wheeler volumes targeted at **30–40% of new 2-wheeler financing**, significantly elevating long-term yield potential. ## D. New Business Lines * **Portfolio Diversification:** Aggressive expansion into used cars, CVs, construction equipment, and unsecured loyalty loans as part of evolution into a "financier of everything on wheels." * **Co-Lending Rationalization:** ICE co-lending scaled back due to **low yields and capital inefficiency**, while EV-focused partnerships (WheelsEMI, EVFin) continue to support green funding. * **Investment Phase:** New verticals currently unprofitable and subsidized by core 2-wheeler business, leading to higher opex; **digital spend now comparable to large NBFCs**. * **Operational Tech Upgrade:** Best-in-class LOS and BRE systems in place; **data lake with EY** under development to enable **P&L visibility down to frontline roles**, driving accountability and financial discipline. --- # 5. Disbursement & Volume Trends ## A. Key Figures * **Disbursements (9-day YoY):** **26% increase** (post-Sept 22) * **Industry Volumes:** **12 lakh units** (Sept decline) * **Q3 Disbursement Guidance:** **₹800–850 Cr** (conservative) · **₹1,000–1,100 Cr** (aggressive) * **eNACH Penetration:** **92%** (+12–17 pts from prior) * **Digital Collections:** **77%** of total * Average LTV: 80.22% (down from 84–85%) * **2-Wheeler Bounce Rate:** **14%** (vs. industry 20–25%) ## B. Quarterly Disbursements * **Post-Festive Rebound:** Disbursement momentum recovered sharply post-Navratri with strong double-digit YoY growth, reversing a weak September driven by GST-related customer hesitation and broader market softness. * **Cautious Q3 Outlook:** Management expects solid disbursement volume in Q3, with upside potential from festive demand; however, aggressive targets exclude material contribution from upcoming used 2-wheeler loans, which will only launch in November/December. ## C. Market Share Shifts * **Divergent Share Trends:** Pan-India market share expanded significantly quarter-on-quarter, indicating broader footprint gains, while share in core operational locations declined sharply, suggesting localized competitive or execution challenges. ## D. LTV & Bounce Rate * **Tighter Underwriting:** Sharp decline in average LTV reflects disciplined lending standards and improved risk management, supporting portfolio quality. * **Collections Strength:** High eNACH adoption and **digital collections penetration at 77%** are enabling efficient recovery, contributing to a best-in-class bounce rate in the 2-wheeler segment despite its inherent risk. --- # 6. Credit & Collection Risks ## A. Key Figures * External Agency Fees: ₹15.6 Cr Q1 · ₹21.6 Cr Q2 (sharp sequential increase) * Repossession Loss: **₹8.5 Cr** despite 60% provisioning, due to low recovery rates * **Recovery Rate on Repossessed Assets:** **~40%** (below expectations due to asset condition) ## B. Recovery Rate Challenges * **Strategic Credit Tightening:** Revised credit policies implemented in Q2, including dealer/location risk grading (A–E), with Category E fully restricted and C/D facing tighter norms. * **Digital Collection Shift:** Transitioning to a digitally run platform for collections, leveraging GFF use cases, to be rolled out over the next 6–12 months. * **Recovery Improvement Outlook:** Targeted enhancement in recovery rates expected from Q3 onward via stronger repossession and recovery execution. ## C. External Agency Costs * **Fee Structure Clarified:** Management refutes 12% payout claim, clarifying that Muthoot FinCorp branches receive **50%** of recovery amounts; NIM and fee bases are not directly comparable. * **Digital Tools Deployed:** CoreCard adopted for origination and bot-based calling for collections, in partnership with Resolve to optimize recovery efficiency. ## D. Repossession Losses * **Suboptimal Asset Recovery:** Low realization of **~40%** on repossessed assets—driven by poor condition or "accidental" cases—led to a ₹5 Cr loss despite high provisioning. --- # 7. Guidance & Outlook ## A. Key Figures * **Q3 Disbursements:** **₹800–850 Cr** (conservative) · **~₹1,100 Cr** (aggressive scenario) * **FY26 AUM Growth Target:** **~₹4,000 Cr** (expected) · **₹4,000–4,200 Cr** (initial guidance) * **DA Deal Volume:** **₹100–200 Cr** (split across two quarters) * **Current AUM:** **₹3,300 Cr** (up from ₹2,000 Cr to ₹3,000 Cr last year) * **ROA Guidance:** **2%** (full-year) · **4%** (long-term at ₹10,000 Cr AUM) * ROE Targets: 2–2.5% (next 12 months) · 3.25% (subsequent period) · 4% (3-year horizon) * **Credit Cost (Q3):** **0.5% or lower** (projected) · **₹800–850 Cr** (business volume basis) ## B. AUM & Disbursement Targets * **Resilient Growth Trajectory:** AUM on track to approach ₹4,000 Cr despite Q2 headwinds, supported by strong Q3 momentum and upcoming DA transactions. * **Capital Efficiency Strategy:** Successful Q3 DA deals could defer equity raises to next fiscal Q1, preserving capital structure flexibility. * **Long-Term Scaling Vision:** Ambitious ₹10,000 Cr AUM target by 2028 underpinned by **50% YoY growth** in prior year and strategic portfolio shift toward higher-quality segments. ## C. ROA & ROE Projections * **Path to Profitability:** Full-year 2% ROA hinges on closing a **material business shortfall in Q3**, tripling recovery efforts, and executing **three DA deals**. * **Leverage & Capital Optimization:** DA-driven reserve buildup aims to reduce debt-to-equity from **5x to 4x–2.5x**, enhancing capital efficiency and ROA/ROE leverage. * **Investment Phase Narrative:** Subdued near-term ROA reflects deliberate investments in tech and talent, framed as foundational for future 4% ROA at scale. ## D. Full-Year Credit Cost * **Improving Asset Quality:** Credit cost expected to remain at **0.5% or lower** in Q3, supported by record agency recoveries and seasonal tailwinds. * **Yield Expansion Momentum:** Anticipated **100 bps Q3 yield increase** driven by risk-based pricing and new used 2-wheeler business, partially offsetting prior credit cost overruns.