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Compounding with discipline, scaling up with resilience

* MAS Financial (MAS) has delivered a steady and resilient performance in FY26 despite a challenging macroeconomic environment, underscoring the strength of its business model. The company aims to maintain an AUM growth trajectory of ~20-25%, anchored to risk-adjusted return metrics, while targeting a sustainable RoA of ~2.75-3.0%, healthy RoE and strong capital adequacy, ensuring that expansion remains both value-accretive and structurally sustainable. This long-standing emphasis on prudent capital allocation and consistent execution across cycles forms the foundation of the company’s evolution into a resilient, high-quality lending franchise.

* MSME lending, contributing over 70% of MAS’s portfolio (MEL ~37% of AUM and SME ~34%), remains the key growth driver, supported by India’s large MSME credit opportunity and improving credit visibility due to the formalization, GST adoption, and digitalization trends. The company continues to deepen its presence in existing markets, selectively expand into adjacent geographies, and gradually increase the ticket sizes, positioning the segment well to drive 20-25% portfolio growth over the medium term.

* MAS is diversifying beyond its core MSME franchise by scaling up its granular retail portfolio across MEL, 2W, used CV and salaried PL, strengthening its secured lending mix. Simultaneously, the company is evolving into an ecosystem-driven lender through MSME cross-selling opportunities, embedded finance partnerships, and a robust distribution network of 200+ branches and channel partners, supporting scalable growth while maintaining prudent risk management.

* Asset quality remains central to MAS’s operating philosophy, with growth explicitly subordinated to portfolio stability. The company has proactive monitoring systems and early warning frameworks, supported by behavioral and field-level intelligence. Recent selective tightening in vulnerable sectors reflects a responsive risk stance. Credit costs are expected to remain within the guided range of ~1.25-1.5% of AUM, supported by disciplined underwriting and stable collections.

* MAS’s strategy is built on a balanced triad of MSME-led growth, calibrated retail diversification, and unwavering asset quality discipline. The franchise is evolving into a more diversified lender, but growth remains tightly calibrated to ensure long-term resilience. This approach positions MAS as a steady compounding franchise capable of sustaining high-teen growth through cycles while preserving strong credit quality.

* We estimate MAS to deliver an AUM/PAT CAGR of 19%/20% over FY26-28E, with RoA/RoE of ~3.1%/15% in FY28E. Reiterate BUY with a TP of INR385 (based on 1.8x FY28E BV).

Valuation and view

* MAS remains well positioned to deliver sustainable long-term growth, supported by its leadership in MSME lending, an expanding retail and housing finance franchise, and a differentiated distribution model. Management’s disciplined execution, conservative risk framework and consistent focus on asset quality provide strong earnings visibility, while its aspiration to build an INR1t AUM franchise by 2036 underscores confidence in the long-term opportunity. Backed by stable leadership, robust governance and a well-defined strategy, MAS is well placed to compound its loan book and profitability over the medium to long term.

* We estimate MAS to deliver an AUM/PAT CAGR of 19%/20% over FY26-28E, with RoA/RoE of ~3.1%/15% in FY28E. Reiterate BUY with a TP of INR385 (based on 1.8x FY28E BV).

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