IGI Logo

Strong growth with improving asset quality

Q4 disbursements saw YoY growth of 25% with a pick-up across segments, resulting in AUM growth of 21% YoY. Factoring in sustained momentum, we build in AUM growth of ~22%/ 21% in FY27/ FY28E. We expect NIM (calc.) to be stable at ~7%, and higher incremental yield to compensate for a rise in CoF. Opex ratio is likely to see improvement led by productivity gains. Asset quality improved QoQ and credit cost stood at 1.6%, with further moderation expected in H1FY27. We build in credit cost of 1.6%/1.5% for FY27/FY28E supported by recovery in VF and CSEL segments. We increase our estimates given the positive outlook on growth, credit cost and opex improvement with FY28E P/ABV multiple of 3.8x (vs. 3.7x earlier). Retain ‘BUY’ with TP of INR1,950.

Ramp-up in Q4 disbursements; expect 22% growth in FY27E:

Q4 disbursements grew 25% YoY to INR329.1bn with VF/ LAP/ new business growing at 26%/ 5%/ 58% YoY, while HL de-grew by 4% YoY. Vehicle finance continues to see robust demand and the company expects to grow the book by ~18% in FY27 led by market share gains. New business loan disbursements reported strong uptick in growth due to ramp-up in gold loans following a granular customer acquisition strategy. While CIFC is seeing strong traction across all segments, disbursements in the HL/LAP segment saw weak growth (- 4%/ 5%) on account of procedural delays (documentation/ lien marking) in southern regions due to elections. However, the company expects to see recovery in FY27 with AUM growth of 25% driven by improved productivity of new branches. Q4 AUM grew 21% YoY /6% QoQ to INR2,243.3bn with 18%-26% YoY growth across VF/ HL & LAP and new business verticals. CIFC has guided for 20%-23% AUM growth in FY27E; we build in 22%/ 21% YoY growth for FY27/FY28E.

NIM improves, opex remains elevated:

NII grew by 26% YoY/8% QoQ to INR38.6bn. Reported yield improved to 15.0% (+30bps QoQ), while CoF declined by 10bps QoQ to 6.6%. Consequently, reported NIM improved by 40bps QoQ to 8.4%. The company expects it to be range-bound at (~8%) in FY27, with higher yield from new businesses offset by a rise in CoF. We expect FY27E NIM (calc.) to be at FY26 levels (7%) in, in line with guidance. Opex costs remain elevated (opex/ AUM ratio at 3.2%) due to CGTMSE related payment (INR380mn) and continuous expansion in new verticals (gold loans). The company plans to add ~300 new gold loan branches and unlock another ~100 branches for VF in FY27. We expect the high opex spend in new businesses to be offset by an improvement in productivity. The conversion of CCDs amounting to INR3bn in Oct’25 and INR10.6bn in Jan‘26, resulted in a boost in Tier 1 capital (Tier 1 ratio at 14.73% as of Mar’26). Remaining conversion of INR6.3bn is likely to happen by H1FY27, further augmenting capital.

Expect credit cost to moderate in FY27:

Asset quality improved in Q4 with GS3/NS3 at 3.05%/ 1.61% vs. 3.36%/ 1.91% in Q3. CIFC maintains PCR of 47%, while total provisions stood at ~2% of gross advances. The management has created an overlay of INR2bn as a prudent measure against the West Asia war. However, it expects the impact of fuel price hikes on CIFC to be limited, given the relatively smaller share of HCV and large fleet operator in its portfolio. Moreover, the trend of early defaults in Apr’26 indicates a positive trend compared to Apr’24/25 levels. Credit cost improved to 1.6% in Q4 (pre-overlay), and the company expects it to improve to 1.5% in FY27 with recovery in VF and CSEL segments. We build in credit cost of 1.6%/1.5% in FY27/ FY28E.

Please refer disclaimer at https://www.plindia.com/disclaimer/

SEBI Registration No. INH000000271