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Growth intact; margin and credit cost remain supportive

Q1 disbursements saw YoY growth of 22% led by VF and new business segments, resulting in AUM growth of 22% YoY. We expect growth momentum to sustain, supported by market share expansion in non-VF segments and build an AUM growth of 23%/ 22% for FY27E/FY28E. NIM moderated marginally in Q1; however, we expect it to be range-bound at ~7% in FY27E supported by CCD conversion, stable CoF and favorable product mix. Operating efficiencies aided improvement in opex ratio; branch expansion and productivity gains are expected to support profitability. Asset quality witnessed seasonal moderation though credit cost remained controlled at 1.5%, with further improvement expected. We remain conservative and build a credit cost of 1.6%/1.5% for FY27/FY28E. We slightly tweak our estimates given the positive outlook on growth, credit cost and opex improvement with an unchanged FY28E P/ABV multiple of 3.8x. Maintain ‘Accumulate’ with TP of INR1,950.

Disbursements remain healthy; expect 23% growth in FY27E

Q1 disbursements grew ~22% YoY to INR296.1bn with VF/ HL / LAP/ new business growing at 21%/ 2%/ 2%/ 55% YoY. Disbursements for mortgage, used vehicles and SBPL were impacted during the quarter due to a change in recognition methodology from cheque handover to cheque clearance. However, growth momentum is expected to recover in subsequent quarters as the one-time impact normalizes. Gold loans witnessed robust traction supported by deeper network expansion and strong customer acceptance, with the company targeting an AUM of INR50bn by FY27. The company plans to add 360 new gold loan branches and is focusing on increasing its customer base in concentrated micromarkets. Q1 AUM grew 22% YoY /4% QoQ to INR2,335.9bn with 18%-31% YoY growth across VF/ HL & LAP and new business verticals. While management highlighted a high base in H2 in disbursements, it is confident of delivering an AUM growth of ~23%. We build 23%/ 22% YoY growth for FY27/FY28E with a strong ramp-up in HL, LAP and consumer loans.

NIM resilient; opex improves:

NII grew 27% YoY/5% QoQ to INR40.4bn driven by healthy loan growth. Reported yield declined sequentially to 14.9% (-10bps QoQ), while CoF increased by ~10bps QoQ to 6.7%. Consequently, reported NIM moderated by ~20bps QoQ to 8.2%. Commentary indicated the possibility of a repo-rate hike in H2FY27, resulting in ~10bps increase in FY27E CoF. However, the conversion of CCDs amounting to INR 2bn in Jul’26 and INR4.3bn in Oct’26 and a favorable product mix will likely offset the impact. We expect NIM (calc.) to be largely stable at 7.0% for FY27E. Cost-to-income ratio improved to 36.3% (vs. 37.6% YoY) aided by operating efficiencies. The company plans to add ~360 new gold loan branches and unlock another ~125 branches in FY27, supporting expansion across geographies. We build 10-30 bps improvement in C/I ratio over FY27/FY28E.

Expect credit cost at 1.6% in FY27E:

Asset quality moderated in Q1 with GS3/NS3 at 3.29%/ 1.81% vs. 3.05%/ 1.63% in Q4 due to seasonality. CIFC maintains PCR of ~46%, while total provisions stood at ~2% of gross advances. Reported credit cost for the quarter stood at 1.5% (vs. 1.6% QoQ/ 1.8% YoY), in-line with management guidance. The company is not seeing any asset quality stress from the ongoing West Asia crisis and El-Nino impact. The GNPA in VF portfolio marginally increased by ~20bps QoQ to 4.05% (compared to 45bps in Q1FY26) reflecting continued improvement in asset quality amid a challenging macro environment. The CSEL portfolio also witnessed steady improvement across delinquency buckets supported by tighter underwriting standards. Management remains confident of further moderation in credit costs over FY27. We build a credit cost of 1.6%/1.5% in FY27/ FY28E

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