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Healthy growth in VF AUM; credit costs elevated

PAT grows ~64% YoY but declines ~13% sequentially

* IndoStar’s 3QFY25 PAT at INR277m rose ~64% YoY (PY: INR169m) but declined ~13% QoQ. Credit costs were higher sequentially at ~INR480m (PQ: ~INR193m), translating into annualized credit costs of ~1.8% (PQ: 0.8%).

* Total AUM stood at ~INR106b and grew ~32% YoY and ~5% QoQ. On 31st Dec’24, IndoStar sold a pool of assets (worth INR1.74b) from its CV business to an ARC.

Niwas Housing Finance (earlier IndoStar Home Finance)

* AUM as of Dec’24 stood at ~INR27.5b and grew 34% YoY/~7% QoQ.

* GS3 rose ~25bp QoQ to 1.65% and NS3 increased ~20bp QoQ to 1.3%.

* The subsidiary delivered a PAT of INR160m in 3QFY25 (vs. INR140m in 2QFY25)

* CRAR came in at ~52.6%; the debt-equity ratio stood at 3x.

IndoStar Capital Finance Limited (ICFL)

* ICFL delivered a PAT of INR114m in 3QFY25, which declined ~37% QoQ.

* AUM stood at ~INR78.7b and grew ~4% QoQ. Of this, the AUM of retail vehicle finance came in at ~INR73b, which grew ~5% QoQ and ~51% YoY. Disbursements stood at ~INR12.9b and rose 15% YoY.

* GS3 improved ~5bp QoQ to ~4.9% whereas NS3 rose ~20bp QoQ to 2.7%.

* CRAR was healthy at ~28.5%; the debt-equity ratio stood at 2x.

Valuation and view

* Indostar has a strong focus on expanding its retail business, specifically in the Commercial Vehicle (CV) lending segment. The company plans to target the lucrative used CV market, with increasing emphasis on used and light commercial vehicles in tier II and III towns.

* The company plans to boost its disbursement capabilities by expanding its distribution presence. Indostar trades at 1.0x FY27E P/BV and is transitioning into a significant used-CV and MSME lender. We might make changes to our estimates after the earnings call to be held on 21st Jan 2025.

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