💰 Financial Performance

Revenue Growth by Segment

Interest income, the primary revenue segment, grew 21.33% YoY in Q2 FY26 to INR 45.93 Cr, driven by a 9.55% YoY increase in Assets Under Management (AUM) which reached INR 567.27 Cr. Fee and commission income contributed INR 0.88 Cr in H1 FY26, a slight decline from INR 1.02 Cr YoY.

Geographic Revenue Split

The company operates across 6 states including Maharashtra, Madhya Pradesh, NCR, Gujarat, Rajasthan, and Tamil Nadu. While specific percentage splits per state are not disclosed, the company has expanded its footprint to 50+ locations served by 35 physical branches to capture rural and semi-urban demand.

Profitability Margins

Profit After Tax (PAT) for FY25 was INR 11.10 Cr, up 25% from INR 8.88 Cr in FY24. Net Interest Margin (NIM) stood at 7.69% in FY25 and remained healthy at 7.65% in H1 FY26. Return on Net Worth (RoNW) improved from 7.42% to 8.02% YoY, reflecting better capital efficiency as operations scaled.

EBITDA Margin

Profit Before Tax (PBT) margin for FY25 was 14.94% (INR 14.19 Cr PBT on INR 94.96 Cr Gross Income). In H1 FY26, PBT stood at INR 4.08 Cr, impacted by higher finance costs which rose to INR 26.72 Cr from INR 21.32 Cr YoY due to the increasing interest rate environment.

Capital Expenditure

Depreciation and amortization expenses increased significantly to INR 5.12 Cr in FY25 from INR 0.67 Cr in FY24, indicating substantial historical investment in physical branch infrastructure and technology systems to support the growth of its 35-branch network.

Credit Rating & Borrowing

Star HFL maintains a credit rating of BBB Stable from both CARE and India Ratings. The average cost of funds increased from 11.50% in FY24 to 12.78% in FY25, reflecting a 128 bps rise in borrowing costs from its 10+ lending partners.

⚙️ Operational Drivers

Raw Materials

The primary 'raw material' for Star HFL is Capital/Debt Funds, which represented 48.9% of gross income in FY25 (Finance Cost of INR 46.49 Cr vs Gross Income of INR 94.96 Cr).

Import Sources

Funds are sourced domestically within India from a mix of public sector banks, private banks, and financial institutions.

Key Suppliers

Key lenders providing capital include Indian Overseas Bank, Mas Financial Services, Suryoday Small Finance Bank, LIC Housing Finance, Bajaj Finance, ESAF Small Finance Bank, Northern Arc Capital, Poonawala Fincorp, Shriram Finance, and Sundaram Finance.

Capacity Expansion

Current capacity includes 35 physical branches and 50+ points of presence with 266 employees. The company plans continued expansion into Tier II and III towns to tap into latent demand for affordable housing finance.

Raw Material Costs

Finance costs (cost of capital) rose 25.3% YoY in H1 FY26 to INR 26.72 Cr. The company manages this through a high-yield lending strategy, with average yield on advances increasing from 16.96% to 19.24% YoY.

Manufacturing Efficiency

Not applicable as a service-based financial institution; however, the company leverages AI and ML to streamline underwriting and predict default risks.

Logistics & Distribution

Distribution is handled through 35 physical branches, which act as localized hubs for customer acquisition and credit appraisal in rural geographies.

📈 Strategic Growth

Expected Growth Rate

13%

Growth Strategy

Growth will be achieved by scaling AUM through on-book disbursements and co-lending partnerships with banks, expanding the physical branch network in Tier II/III towns, and utilizing digital verification and AI/ML to improve loan approval efficiency and risk detection.

Products & Services

Retail home loans up to INR 25 lakhs for ready-to-move-in homes, home construction, home extension, and home renovation, specifically targeting the EWS/LIG segments.

Brand Portfolio

Star HFL (formerly known as Akme Star Housing Finance Limited).

New Products/Services

Collaborative co-lending arrangements with traditional banks to provide a broader range of home loan options while leveraging the company's ground-level reach.

Market Expansion

Targeting Tier II and III towns and semi-urban/rural areas in existing and new operational geographies to capture the 'Housing for All' demand.

Market Share & Ranking

While banks currently dominate the market, HFCs like Star HFL are expected to grow at a 13% CAGR, positioning them as key players in the fragmented rural housing finance space.

Strategic Alliances

Partnerships with 10+ financial institutions for term loans and co-lending arrangements to diversify funding and enhance market reach.

🌍 External Factors

Industry Trends

The industry is shifting toward Tier 2/3 cities and adopting digital verification processes. Collaborative lending between banks and HFCs is becoming a standard to enhance customer options.

Competitive Landscape

Key competitors include traditional banks with lower costs of capital and other regional HFCs/NBFCs operating in the affordable housing space.

Competitive Moat

The moat is built on specialized credit underwriting for the 'unbanked' EWS/LIG segment in rural areas where traditional banks lack reach. This is sustainable due to the high-touch physical branch model and domain expertise in non-formal income assessment.

Macro Economic Sensitivity

Highly sensitive to interest rate cycles and rural economic health; the real estate market is projected to grow at a 7% CAGR from FY24 to FY29.

Consumer Behavior

Reverse migration from urban to rural areas has bolstered demand for housing in Star HFL's core semi-urban and rural geographies.

Geopolitical Risks

Minimal direct impact due to rural domestic focus, though global economic recovery facilitates broader sector revitalization.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by RBI and NHB guidelines, including capital adequacy norms, provisioning requirements for NPAs, and priority sector lending (PSL) standards.

Taxation Policy Impact

The company had an effective tax rate of approximately 21.7% in FY25, with a tax provision of INR 3.09 Cr on PBT of INR 14.19 Cr.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the Asset-Liability Mismatch (ALM) risk, which could affect solvency if short-to-medium term funding sources dry up while long-term assets remain on the books.

Geographic Concentration Risk

Concentrated in 6 Indian states, making the company vulnerable to regional economic downturns or regulatory changes in those specific areas.

Third Party Dependencies

High dependency on NHB refinance facilities and term loans from a group of 10+ banks for liquidity.

Technology Obsolescence Risk

Risk of falling behind in digital transformation; mitigated by adopting AI/ML and digital verification to improve the consumer experience.

Credit & Counterparty Risk

Credit risk is managed through a conservative framework, maintaining GNPA at 1.65% and NNPA at 1.16% as of Sep 2025, with 100% provision coverage on NPAs.