💰 Financial Performance

Revenue Growth by Segment

Total Income reached a record INR 2,240 million in Q2 FY26, growing 20% YoY. This was driven by a 24% YoY increase in Interest Income to INR 2,077 million. For H1 FY26, Total Income stood at INR 4,427 million, up 18.5% YoY, primarily fueled by the co-lending segment which saw disbursements rise 41% YoY to INR 11,025 million.

Geographic Revenue Split

The company operates across 22 states and Union Territories. While specific revenue % per state is not disclosed, the company is expanding its footprint with 4,380 touchpoints as of Q2 FY26, up from 3,565 in FY25, to mitigate geographic concentration risks in its core northern and central Indian markets.

Profitability Margins

Net Interest Margin (NIM) stood at 6.5% in Q2 FY26, a marginal 1 bps YoY decline. Net Profit Ratio for FY25 was 36.09%. Profit After Tax (PAT) for Q2 FY26 was INR 515 million, up 3.3% YoY, while H1 FY26 PAT reached INR 987 million, an 8% YoY increase. Return on Equity (ROE) was 11.7% and Return on Assets (ROA) was 3.6% for H1 FY26.

EBITDA Margin

Pre-Provision Operating Profit (PPOP) for Q2 FY26 was INR 809 million, up 6.8% YoY. The PPOP margin is impacted by a 33.7% YoY increase in operating expenses (INR 453 million) due to the addition of 815 touchpoints and 51 branches in H1 FY26 to support long-term scaling.

Capital Expenditure

Not disclosed as a traditional CapEx figure; however, the company invested in expanding its physical infrastructure to 402 branches and 4,380 total touchpoints by September 2025. Equity capital increased from INR 90.21 crore to INR 90.95 crore following a USD 4 million FCCB conversion in September 2025.

Credit Rating & Borrowing

The company holds an IVR AA/Stable/A1+ rating from Infomerics. Average borrowing cost significantly improved to 10.5% in Q2 FY26, a reduction of 127 bps YoY, driven by a diverse lender base where Public Sector Banks contribute 74% of the borrowing mix.

⚙️ Operational Drivers

Raw Materials

As a financial services entity, the primary 'raw material' is capital. The borrowing mix consists of Public Sector Banks (74%), Private Banks (23%), and other sources (3%).

Import Sources

Capital is sourced domestically from major Indian banks including SBI, PNB, Bank of Baroda, and UCO Bank, and internationally via FCCB issuances (USD 50 million maiden issuance).

Key Suppliers

Key financial partners providing liquidity include State Bank of India, Punjab National Bank, Bank of Baroda, UCO Bank, Karnataka Bank, and Bank of India.

Capacity Expansion

Current 'capacity' is represented by an AUM of INR 54,494 million as of Q2 FY26. The company added 383 new touchpoints in Q2 FY26 alone, reaching a total of 4,380. The strategic goal is to double the AUM within the next 3 years, implying a target of approximately INR 1,08,000 million.

Raw Material Costs

Interest expense, the cost of capital, was INR 978 million in Q2 FY26, up 26.5% YoY. Despite the absolute increase due to higher borrowing volumes, the cost of borrowing rate decreased to 10.5% from 11.77% YoY.

Manufacturing Efficiency

Operational efficiency is tracked via the 98.4% collection efficiency and a low GNPA of 0.81% as of Q2 FY26, which is significantly better than the industry average for small-ticket lending.

Logistics & Distribution

Distribution is managed through 2,585 Distribution Points and 1,393 Business Correspondents (BCs). Operating expenses as a % of Total Income stood at approximately 20.2% in Q2 FY26.

📈 Strategic Growth

Expected Growth Rate

20%

Growth Strategy

The company plans to achieve a 20% CAGR by doubling its AUM in 3 years through geographic expansion (adding 815 touchpoints in H1 FY26) and product diversification. It is transitioning from a focus on Small Income Generation Loans to higher-ticket segments like Loan Against Property (LAP), Tractor finance, and Medical Equipment finance.

Products & Services

Small Income Generation Loans (IGL), SME & MSME Loans, Vehicle Finance, Entrepreneurial Loans, and Priority Sector Lending.

Brand Portfolio

PAISALO

New Products/Services

New rollouts include Loan Against Property (LAP), Tractor Finance, and Medical Equipment Finance, which are currently moving from pilot to full rollout across Agri hubs like Pune and Chandigarh.

Market Expansion

Expansion is focused on core Agri hubs and states like MP, UP, Haryana, Rajasthan, and Delhi NCR, utilizing a network of 4,380 touchpoints.

Market Share & Ranking

Not disclosed in absolute ranking, but identified as a 'Middle Layer NBFC' by RBI with a significant co-lending partnership with SBI.

Strategic Alliances

Key co-lending partnerships with State Bank of India, Punjab National Bank, Bank of Baroda, and Karnataka Bank allow for capital-efficient growth.

🌍 External Factors

Industry Trends

The industry is shifting toward regulated co-lending models. New RBI co-lending guidelines effective January 1, 2026, are viewed as a 'positive development' that will allow Paisalo to partner with a wider range of Fintechs and regulated entities.

Competitive Landscape

Faces intense competition from other NBFCs, Microfinance Institutions (MFIs), and small finance banks targeting the MSME and rural sectors.

Competitive Moat

The primary moat is the deep-rooted co-lending tie-up with SBI and other PSU banks, which provides a low-cost funding pipeline (10.5% cost) and a massive distribution reach that is difficult for new NBFCs to replicate.

Macro Economic Sensitivity

Highly sensitive to the rural Indian economy and inflation, as its primary borrowers are at the 'bottom of the economic pyramid.' Slowdowns in rural demand directly impact the 98.4% collection efficiency.

Consumer Behavior

Increasing digital adoption among rural borrowers is allowing Paisalo to scale its customer franchise to 13 million, though it increases the risk of system downtime and data breaches.

Geopolitical Risks

Minimal direct impact as operations are 100% domestic, though global interest rate shifts affect the pricing of FCCB instruments.

⚖️ Regulatory & Governance

Industry Regulations

Classified as a 'Non-Deposit Taking Middle Layer NBFC' under RBI's scale-based regulation. Must maintain a Capital Adequacy Ratio (CAR) above 15%; Paisalo currently maintains a robust 38.2%.

Environmental Compliance

The company focuses on Social and Governance (ESG) pillars, specifically financial inclusion for the underserved, though specific compliance costs are not disclosed.

Taxation Policy Impact

Effective tax rate is approximately 25.3% based on Q2 FY26 PBT of INR 690 million and Tax of INR 175 million.

⚠️ Risk Analysis

Key Uncertainties

Potential for increased credit costs (which rose 37.6% YoY to INR 119 million in Q2) if asset quality normalizes from current low levels of 0.81% GNPA.

Geographic Concentration Risk

The company notes portfolio and geographic concentration as a risk, particularly with emerging 'state-level stress' in Bihar and Eastern UP due to political cycles.

Third Party Dependencies

High dependency on Public Sector Banks, which provide 74% of total borrowings.

Technology Obsolescence Risk

The company is mitigating this through its digital footprint expansion, though it acknowledges that greater digital adoption increases exposure to data breaches and frauds.

Credit & Counterparty Risk

Receivables quality is currently high with a Net NPA of 0.65%, but the company is entering 'riskier' segments like LAP and equipment finance to drive the 20% growth target.