💰 Financial Performance

Revenue Growth by Segment

The gross loan portfolio (secured MSME loans) grew 23% YoY to INR 11,877 Cr in FY25 and further increased 18% YoY to INR 12,847.1 Cr in Q2FY26. Interest income for Q2FY26 was INR 773.1 Cr, representing a 14% YoY increase.

Geographic Revenue Split

Operations originated in Tamil Nadu; while specific regional percentage splits are not provided, the company is actively diversifying its footprint across semi-urban and rural markets via 748 branches to reduce regional concentration.

Profitability Margins

Net Interest Margin (NIM) was 16.32% in FY25, slightly down from 16.45% in FY24. The PAT margin was approximately 37.4% based on a PAT of INR 1,072 Cr on total income of INR 2,866 Cr in FY25.

EBITDA Margin

Pre-provision operating profit (PPOP) was INR 1,520 Cr in FY25, a 29.8% increase from INR 1,171 Cr in FY24, reflecting strong core profitability growth despite rising operational investments.

Capital Expenditure

Significant historical investment was made in expanding the branch network from 520 to 748 branches and increasing the workforce to 11,934 employees in FY25; specific INR Cr values for future capital expenditure are not disclosed.

Credit Rating & Borrowing

Ratings are reaffirmed at [ICRA]AA- (Stable) and CARE AA- (Positive). Borrowing costs are managed by diversifying into ECBs (INR 76 Cr) and mutual funds to secure competitive rates below the 23% IRR charged on loans.

⚙️ Operational Drivers

Raw Materials

Debt Capital (Bank Borrowings and Debt Securities) represents the primary 'raw material' for lending operations; interest expense on these borrowings is the primary cost, with total borrowings standing at INR 8,376 Cr as of Q2FY26.

Import Sources

Funding is sourced domestically from Indian public and private banks and internationally via External Commercial Borrowings (ECB) of INR 76 Cr, representing 0.86% of total borrowings.

Key Suppliers

Key lenders providing capital include State Bank of India, Bank of Baroda, Union Bank of India, Indian Bank, Canara Bank, Bank of India, Bank of Maharashtra, HDFC MF, Nomura Asset Management, Goldman Sachs, and Vanguard.

Capacity Expansion

Current branch capacity is 748 branches as of March 2025, up 43.8% from 520 in the previous year. The company is expanding its footprint to support a projected 15-17% growth in the loan portfolio.

Raw Material Costs

Interest expense on borrowings was INR 7,331 Mn in H1FY26. The company strategically reduced incremental lending rates by 200 bps in FY25, necessitating the procurement of funds at competitive rates to protect interest spreads.

Manufacturing Efficiency

Operating efficiency, measured by operating expenses as a percentage of average total assets, improved to 5.24% in FY25 from 5.50% in FY24, reflecting better utilization of the expanded branch and employee network.

Logistics & Distribution

Distribution is managed through a network of 748 branches; operating expenses (including branch costs) were 5.24% of average total assets in FY25.

📈 Strategic Growth

Expected Growth Rate

15-17%

Growth Strategy

The company plans to achieve growth by expanding its branch network (748 branches) and increasing its field officer count to 11,934. It is shifting focus toward higher ticket sizes (INR 3-10 lakh) to target a more resilient borrower profile and tapping into the INR 22 trillion addressable MSME market gap.

Products & Services

Secured MSME loans, mortgage-backed business loans, small business loans, and self-employed individual loans.

Brand Portfolio

Five-Star Business Finance

New Products/Services

Focusing on higher ticket size loans (INR 3-10 lakh) to improve asset quality; specific revenue contribution percentages for this shift are not explicitly disclosed.

Market Expansion

Expansion into semi-urban and rapidly developing rural areas across India, increasing branch count from 520 to 748 in one year to tap into the INR 22 trillion MSME market.

Market Share & Ranking

The company addresses a 2% portion of the 'addressed' MSME market, with a total addressable market (TAM) of INR 22 trillion.

🌍 External Factors

Industry Trends

NBFC growth is expected to moderate to 15-17% (a 600-800 bps decline) due to regulatory tightening and household indebtedness. The industry is shifting toward 'Quality Growth' and digital-first models.

Competitive Landscape

Competition is increasing in the MSME segment, prompting the company to adjust its credit cost guidance to 1.25-1.35% and NPA guidance to 2.25-2.5% to remain competitive.

Competitive Moat

Durable moat includes a conservative 50% LTV ratio, which provides a significant safety buffer against asset quality deterioration. This is sustainable because it ensures collateral value significantly exceeds loan amounts.

Macro Economic Sensitivity

Sensitive to household indebtedness and over-leverage in the retail segment, which led to a revision in credit cost guidance from 0.75% to 1.25-1.35%.

Consumer Behavior

Micro-entrepreneurs are increasingly transitioning from informal to formal credit channels, creating a large untapped market opportunity of INR 22 trillion.

Geopolitical Risks

Global economic outlook and trade tariffs are noted as external factors that could impact the Indian economy and borrower repayment capabilities.

⚖️ Regulatory & Governance

Industry Regulations

RBI Scale Based Regulation (Middle Layer) and intensified focus on customer protection and pricing disclosures require process recalibration and stricter operational compliance.

Environmental Compliance

ESG policy is in place with a focus on financial inclusion, with 25% of customers being new-to-credit; specific compliance costs in INR are not disclosed.

Taxation Policy Impact

Not explicitly disclosed; however, the company declared a 200% dividend in April 2025 based on strong PAT of INR 1,072 Cr.

Legal Contingencies

The company reports NIL divergences in multiple RBI inspections and has no auditor qualifications; specific pending court case values are not disclosed.

⚠️ Risk Analysis

Key Uncertainties

Over-leverage in the sub-3 lakh segment is the key uncertainty, potentially increasing NPAs to 2.25-2.5% and credit costs to 1.35% if economic conditions for micro-entrepreneurs worsen.

Geographic Concentration Risk

Historically concentrated in Tamil Nadu; expansion to 748 branches is reducing this risk, though specific regional revenue percentages are not disclosed.

Third Party Dependencies

Diversified lender base including public banks (SBI, BoB) and private banks; ECB represents only 0.86% of borrowings, minimizing international dependency.

Technology Obsolescence Risk

Digital-first approach with enhanced IT infrastructure to support growth and ensure robust internal controls and audit trails to mitigate technology risks.

Credit & Counterparty Risk

Gross Stage 3 assets of 2.64% (INR 3,388 Mn) in Q2FY26, with a 51% provision coverage ratio to manage credit exposure quality.