FEDFINA - Fedbank Financi.

📊 NSE: FEDFINA 🏢 Finance & Investments 📅 Last Updated: 12/13/2025 22:04

💰 Financial Performance

Revenue Growth by Segment

Total revenue grew 28.1% YoY to INR 2,079.82 Cr in FY25 from INR 1,623.00 Cr. Net Interest Income (NII) increased 31.8% to INR 1,070.80 Cr. Segmental AUM growth is led by Gold Loans, which grew to represent 40.34% of the total AUM of INR 15,697 Cr as of June 2025, while Medium-Ticket LAP and Small-Ticket LAP also contributed significantly to the 41% CAGR achieved since FY18.

Geographic Revenue Split

The company exhibits high geographic concentration with Maharashtra, Karnataka, and Tamil Nadu collectively contributing 49.19% of the total AUM as of June 30, 2025. This concentration makes revenue sensitive to regional economic shifts in these three core states.

Profitability Margins

Net Profit (PAT) declined by 7.9% to INR 225.18 Cr in FY25 from INR 244.70 Cr in FY24, primarily due to a significant rise in credit costs which reached 1.8% of average assets. Return on Average Total Assets (ROTA) moderated from 2.45% in FY24 to 1.86% in FY25, though it recovered to 2.27% in Q1 FY26 due to improved yields and lower sequential credit costs.

EBITDA Margin

Pre-provision operating profit (PPOP) improved by 31.9% to INR 520 Cr in FY25 from INR 394 Cr in FY24, reflecting scale benefits and an improved Net Interest Margin (NIM) of 7.1% in 9M FY2025 compared to 6.7% in FY2024.

Capital Expenditure

While traditional CAPEX is minimal for an NBFC, the company invested in expanding its physical footprint to 668 branches by June 2025 and plans to add 100+ new branches in FY26. Net worth increased 12.7% to INR 2,547.36 Cr in FY25, supported by internal accruals and a previous INR 600 Cr IPO raise.

Credit Rating & Borrowing

The company maintains a strong credit profile with ratings of CARE AA+; Stable and CRISIL AA+; Stable. Borrowing costs have shown improvement, contributing to a 100 bps sequential improvement in spreads to 8.7% in Q2 FY26. Total borrowings stood at INR 10,268.66 Cr as of March 31, 2025.

⚙️ Operational Drivers

Raw Materials

The primary 'raw material' for Fedfina is debt capital, with Bank Term Loans/ECB/Short-term loans representing 87.5% of the total borrowing mix of INR 10,162 Cr as of June 2025.

Import Sources

Capital is sourced domestically from Indian commercial banks and through External Commercial Borrowings (ECB) from international markets.

Key Suppliers

Federal Bank Limited (FBL) is the primary strategic provider, offering funding support of INR 1,325.53 Cr. Other sources include various commercial banks providing term loans and working capital facilities.

Capacity Expansion

Current operational capacity consists of 668 branches across 18 states and union territories as of June 2025. The company has a planned expansion to add 100+ branches during FY26 to increase market penetration in the gold loan and LAP segments.

Raw Material Costs

Cost of borrowings is the critical cost driver; interest expenses are managed through a skewed resource profile where 87.5% is bank-funded. Interest coverage ratio stood at 1.52 times in Q1 FY26.

Manufacturing Efficiency

Efficiency is measured by branch-level productivity and opex growth containment, which was limited to 2.6% in the recent quarter through cost rationalization measures.

Logistics & Distribution

Distribution is handled through a physical network of 668 branches and a 'doorstep model' for gold loan disbursals to enhance customer reach and service speed.

📈 Strategic Growth

Expected Growth Rate

41%

Growth Strategy

Growth will be achieved by pivoting to a 98% secured lending model, expanding the gold loan business through 100+ new branches in FY26, increasing doorstep coverage, and focusing on self-occupied properties in the LAP segment (82.3% of mortgage AUM). The company also aims to reduce reliance on Direct Assignment (DA) income to focus on core interest income.

Products & Services

Gold loans, Loan Against Property (LAP), Home Loans, and Unsecured Business Loans (currently being phased out).

Brand Portfolio

Fedfina, Fedbank Financial Services Limited.

New Products/Services

Focusing on High-Yield Short-Term (ST) LAP and Low-Risk Medium-Ticket (MT) LAP to optimize capital allocation and yield.

Market Expansion

Expansion into 18 states with a focus on reducing geographic concentration in Maharashtra, Karnataka, and Tamil Nadu by adding 100+ branches in FY26.

Strategic Alliances

Majority owned by Federal Bank Limited (60.97% stake) and backed by True North Fund VI LLP (8.66% stake).

🌍 External Factors

Industry Trends

The NBFC sector is facing headwinds in unsecured segments, leading Fedfina to pivot toward a 98% secured portfolio. The industry is moving toward digital-first models and tighter regulatory oversight on bank-NBFC linkages.

Competitive Landscape

Competes with other retail-focused NBFCs and private banks in the gold loan and LAP segments, facing competitive pricing pressures.

Competitive Moat

The primary moat is the 'Federal Bank' brand and the strong moral and financial support from the parent (60.97% stake), which ensures lower borrowing costs and financial flexibility. This is sustainable as long as the parent maintains a majority stake.

Macro Economic Sensitivity

Highly sensitive to gold prices, which support gold loan AUM growth, and interest rate cycles that impact the cost of bank borrowings (87.5% of debt).

Consumer Behavior

Shift toward doorstep banking and digital loan processing, which Fedfina is addressing through its 'doorstep model' and automated loan lifecycles.

Geopolitical Risks

Indirect exposure through macroeconomic impacts on gold prices and domestic interest rate volatility.

⚖️ Regulatory & Governance

Industry Regulations

Regulated by RBI as a systemically important non-banking finance company (NBFC-ND-SI). Must maintain CAR above 15%; currently at 22.40%.

Environmental Compliance

Compliant with ESG standards, achieving a 24.7% reduction in emission intensity and adopting Green Building practices for 20-40% energy savings.

Taxation Policy Impact

The effective tax rate is approximately 25.8%, with INR 7,857 Lakhs in tax provided against INR 30,375 Lakhs Profit Before Tax in FY25.

⚠️ Risk Analysis

Key Uncertainties

Asset quality in the unseasoned LAP portfolio and the impact of unsecured loan stress on secured exposures could increase credit costs beyond the 1% target, potentially impacting profitability by 10-15%.