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CIFC reported strong growth and profitability in 1Q, with AUM, NII, PPOP, and PAT coming ahead of our and consensus estimates. Asset quality across segments saw slight deterioration, with GS2 and GS3 increasing – typical of seasonality from 4QFY26 to 1QFY27. A positive from this asset-quality deterioration was that the GS2+GS3 increase from 4QFY26 to 1QFY27 was only 49bps (lower than 87bps seen last year). However, relative to vehicle financier peers, this deterioration was worse. Notwithstanding the seasonal jitters of 1Q, buoyed by the overall 1Q performance and demand outlook, the management reaffirmed guidance of ~22% disbursements and AUM growth, along with 3.5% PBT-ROA. To reflect 1Q developments and management commentary, we tweak our estimates over FY27-29, leading to a 6-7% increase in earnings estimates. We reiterate ADD and raise Jun-27E TP by ~5% to Rs2,000 (from Rs1,900), implying FY28E PBV of 3.8x.

Overall strong growth and profitability, with some seasonality in asset quality

CIFC reported a good 1QFY27, with PAT surging ~46% yoy to ~Rs16.54bn, driven by strong NII growth and lower credit costs. Disbursements grew ~22% yoy to ~Rs296.12bn, resulting in AUM growth of ~22% yoy to ~Rs2.33trn, supported by broadbased growth in Vehicle Finance (~21% yoy), Consumer Ecosystem (~52% yoy, led by a ~67% CSEL spike), and SME (~17% yoy). NIM expanded by ~40bps yoy to ~8.2%, on the back of lower yoy COFs, driving return metrics higher, including a healthy PBTROTA of ~3.7% and ROE of ~21.2%. Asset quality saw marginal deterioration due to seasonality, with GS3 at ~3.29% vs 3.16% in 1QFY26, while overall credit cost improved by ~30bps yoy to ~1.5%.

Reiterates outlook on growth and asset quality

The management guided for full-year AUM and disbursement growth of ~22–23%, driven by strong underlying demand and better Jul-26 trends, which were unaffected by macroeconomic or geopolitical headwinds. Margins are expected to sustain at current levels, as the scaling of high-yield segments (CSEL, SBPL, Gold) offsets a potential ~10bps rise in 2H funding costs (factoring in ~2bps repo rate hike). With the ~1.5% credit cost target already achieved in 1Q, the management anticipates further moderation, aided by robust collection efficiencies. Although the company retains a ~Rs2bn management overlay as a prudent buffer against unforeseen macro shocks like El Nino, the management sees no near-term asset quality stress and remains highly optimistic about achieving its PBT-ROTA of ~3.5%

Maintain ADD, while raising Jun-27E TP to Rs2,000

To factor in the strong 1QFY27 performance and management commentary, we adjust our FY27-28 estimates, resulting in EPS estimates expanding by 6-7%. We retain ADD and raise Jun-27E TP by ~5% to Rs2,000, implying FY28E PBV of 3.8x.

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