Company Update : Indostar Capital Finance by Motilal Oswal Financial Services Ltd
Muted disbursements and weak AUM growth
GS3 declined ~1pp QoQ; credit costs elevated
* IndoStar’s 2QFY26 consolidated PAT declined 67% YoY to INR105m.
* NII grew 40% YoY to INR1.5b. Other income stood at INR396m during the quarter (PQ: INR291m)
* Opex declined ~5% YoY to INR1.2b translating into a cost-to-income ratio of ~64% in 2QFY26 (PY: 77% and PQ: 88%). Credit costs stood at ~INR586m (PQ: ~INR4.9b). This translated into annualized credit costs of ~3% in 2QFY26 (PY: ~1%)
Muted disbursements; AUM declines 3% QoQ
* AUM stood at ~INR75.6b and was flat YoY. Disbursements declined ~56% YoY and grew 8% QoQ to ~INR9.3b
* GS3 declined ~1pp QoQ to ~3.05%, whereas NS3 declined ~55bp QoQ to 1.14%.
* CRAR was healthy at ~37.2%; Debt-equity ratio stood at 1.4x.
Valuation and view
* IndoStar focuses on expanding its retail business, specifically in the Commercial Vehicle (CV) lending segment. The company plans to target the lucrative used CV market, with an increasing emphasis on light commercial vehicles in tier II and III towns.
* IndoStar aims to boost its disbursement capabilities by expanding its distribution presence. It trades at 0.9x FY27E P/BV and is transitioning into a significant used-CV and MSME lender. We might review our estimates after the earnings call on 31st Oct’25.
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