Event Participants
Executives
2 Jayesh Jain, Randhir Singh
Analysts
8 Deeya Jain, Rahul Kumar, Raj Patin, Rehan Saiyyed, Shalin Kapadia, Soumya Raghuwanshi, Suhani Singh, Varun Gajaria
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| AUM | ₹8,244 crore | +2% QoQ, +6% YoY; VF AUM ₹7,724 crore, Micro LAP ₹217 crore |
| Retail Disbursements | ₹1,235 crore | +44% YoY vs ₹858 crore; slight dip QoQ; disbursement yield 17.6% vs 17.4% Q4 |
| Micro LAP AUM | ₹217 crore | +24% QoQ, ~2x YoY; 99.7% current; 90+ DPD 0.17%; LTV <40%; yield >20% |
| Gross Stage 3 | 4.84% | Stable; net Stage 3 at 2.48% |
| Early Delinquency Ratio | 2.29% | Down from 5.5% in Q1 FY26; non-starter ratio 1.65% vs 3.76% YoY |
| Collection Efficiency | ~95% | Seasonally softer in Q1/Q2; improving as old book runs off |
| NII | ₹219 crore | +39% YoY, +2% QoQ; driven by NIM expansion to 8.8% from 6.2% YoY |
| PPOP | ₹92.9 crore | Stable vs ₹93.3 crore Q4 FY26; VF PPOP ₹93 crore |
| PAT | ₹11 crore | vs loss of ₹424 crore in Q4 FY26; Q4 included one-time provisioning/overlay |
| NIM | 8.8% | Expanded from 6.2% YoY; overall loan yield 16.5% (P&L, affected by extra liquidity buffer) |
| Cost of Funds (new raises) | 9.11% | Down ~80 bps YoY; high-cost tranche of ~₹250 crore at ~13% to be repaid in Q2 |
| CAR | 34.8% | Strong headroom for growth; debt-to-equity 1.54x |
Geographic & Segment Commentary
Vehicle Finance: AUM ₹7,724 crore (~97% of book driven by disciplined underwriting since Jan 2025). Diversification shifting mix—Cars now 21% of AUM (vs 17%), CE 10% (vs 8%), MSUV down to 35% (vs 42%). Disbursements ₹1,185 crore, +43% YoY; passenger vehicles have overtaken MSUV in volume terms. Early delinquency at 2.29% and non-starter at 1.65% are substantially lower YoY, with the post-Jan 2025 new book performing 60–65% better on 90+ DPD.
Micro LAP: AUM ₹217 crore (+24% QoQ), GNPA just 0.17%, portfolio 99.7% current, LTV below 40%, yield above 20%. Operating from 125 co-located branches (vs 108), 100% digital journey. Average ticket size rose from ₹5.9 lakh to ₹8.2 lakh over the past year, targeting stabilization around ₹10 lakh. Expansion into UP and Bihar set for August–September, with a goal to double FY27 AUM.
Company-Specific & Strategic Commentary
Credit Underwriting Transformation: Multiple rounds of tightening since Jan 2025 (latest April 2026) have shifted the mix: CIBIL >725 customers up from 63% in FY24 to 84% in Q1 FY27; new-to-credit exposure down from 13% to 4%. Post-tightening book (AM component) at 68% of portfolio, expected to reach ~85% by Q4 FY27.
Distribution & Field Expansion: Added 14 branches during the quarter, taking network to 468 branches across 34 states/UTs, targeting 500+ this year. Field sales force up 30% in six months, targeting +50% by March 2027; specialized hiring for verticalization (CV, PV, CE, FE).
Digital & Productivity: Login-to-disbursement turnaround time in vehicle finance reduced 44% YoY through digitization and process simplification. Micro LAP operates fully digital (e-application, e-agreement, e-latch). Early warning systems and region-specific scorecards deployed to standardize portfolio quality.
Liabilities & Liquidity: Raised ₹1,220 crore during the quarter at 9.11%; total debt ₹5,681 crore. Maintained average excess liquidity of ₹529 crore as contingency buffer (negative carry ~₹8 crore in the quarter); positive ALM across all buckets.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Disbursement Growth | 35%+ YoY in Q2 FY27 | July trends support comfort; management expects to meet or potentially exceed the 35% target, with Q1 already at 44% |
| Long-term Guidance | 35% CAGR disbursement growth; PAT ₹450–500 crore by FY29 | Buffer created vs target; strategy underpinned by sales force expansion, branch additions, and productivity gains |
| Portfolio Mix | New book (post-Jan 2025) ~85% of portfolio by Q4 FY27 | Old book run-off (3–3.5 year tenors) to drive meaningful improvement in GNPA and credit cost over next 2–3 quarters |
| Cost of Funds | Converge to ~9% by March 2027 | Last high-cost tranche (~₹250 crore at ~13%) to be repaid in Q2; on-book borrowing cost to decline thereafter |
| Micro LAP AUM | Double in FY27 | Supported by new state launches (UP, Bihar) and ticket-size migration toward ₹10 lakh |
Risks & Constraints
| Risk | Context |
|---|---|
| Macro/Geopolitical | West Asia situation, global conflicts, elevated energy prices and uneven monsoon/El Nino could impact demand; RBI cut FY27 GDP forecast to 6.6%; inflation rose to 4.68% (Jun) vs 3.92% (May). Management retained a large liquidity buffer (₹529 crore excess) as contingency for system tightness. |
| Old Book Asset Quality | ~80% of NPAs relate to pre-Jan 2025 originations; ~70% of fresh NPA additions in Q1 came from the old book. Though running off rapidly, residual stress could keep credit costs elevated for another 2–3 quarters. |
| Security Receipts | Net carrying value ₹578 crore (coverage 64%, improving from 63%). Large construction-linked accounts may take 18–36 months for meaningful redemption; management remains confident in carrying value. |
| Competitive Intensity | Peers have varied models; used CV and Micro LAP segments attractive to large players. Management believes its Tier 3–6 focus and tight underwriting provide insulation, but industry competition could intensify as growth normalizes (ICRA sees CV volumes growing only 4–6% in FY27). |
Q&A Highlights
Portfolio Mix & Micro LAP Targets
- Question: What is the optimal portfolio mix over 3–5 years, and where do returns look superior? (Rehan Saiyyed, Trinetra)
- Answer: Target 15–20% of mix from Micro LAP over 3–5 years. Confidence from early asset quality (0.17% GNPA) enables state expansion; vehicle finance retains higher tenure-adjusted returns given shorter runoff. (Randhir Singh)
Collection Efficiency & Quality Improvement
- Question: Why has collection efficiency dipped while peers are holding up; will it revert? (Shalin Kapadia, IIFL)
- Answer: Q1/Q2 seasonally softer; improvement visible as old book runs off (60% of NPAs from old book). New book performance 60–65% better on 90+ DPD; expect meaningful GNPA/credit cost improvement in 2–3 quarters. (Randhir Singh)
Yields, Margins & Borrowing Cost
- Question: Yield on loan assets declined 40 bps while NIM expanded; how do margins trend in FY27? (Shalin Kapadia, IIFL)
- Answer: P&L yield of 16.5% is mathematical—denominator effect from ₹529 crore extra liquidity. Disbursement yield stable at 17.4–17.6%; expected to hold 17%+. Cost of borrowing to decline as high-cost debt is repaid, with convergence toward 9%. (Jayesh Jain, Randhir Singh)
Growth Drivers in Vehicle Finance
- Question: Which product segments are driving demand, and how will the mix evolve? (Soumya Raghuwanshi, Nirva Securities)
- Answer: Passenger vehicles have overtaken MSUV in disbursement volumes; MSUV muted due to customer delays (fuel/checkout concerns). Growth will come from field force expansion (+30%, targeting +50%), branch additions, and productivity improvements (TAT down 44% YoY). (Randhir Singh)
Write-offs & High-Cost Borrowing
- Question: Write-off figure of ₹62 crore this quarter vs what last quarter? What is the high-cost borrowing coming due? (Rahul Kumar, Vaikariya Fund)
- Answer: Write-offs were ₹7.5 crore in Q4 FY26 vs ₹62 crore in Q1 FY27 (largely technical). ~₹250 crore at ~13% will be repaid in Q2—this is the last high-cost tranche; book cost to converge toward 9% by March. (Jayesh Jain, Randhir Singh)
Regional Asset Quality Trends
- Question: Which geographies show higher credit stress and what drives it? (Raj Patin, RK Investments)
- Answer: Historically South was strongest; stress concentrated in pockets of North/East/West (e.g., MP, UP, Punjab, Haryana). Post-tightening, portfolio quality is more uniform; new book largely okay except a few pockets in Bihar, Jharkhand, Maharashtra, and Rajasthan. Regional scorecards and early warning filters now adjust underwriting dynamically. (Randhir Singh)
Competition & Pricing Discipline
- Question: Are competitors loosening underwriting or pricing aggressively? Will you protect margins or market share? (Rehan Saiyyed, Trinetra)
- Answer: Despite multiple tightening rounds since Jan 2025 (including April 2026), disbursements still grew ~40% YoY—market is large enough. No impact seen from competition so far; same 17%+ yield maintained without sacrificing growth. (Randhir Singh)
Key Takeaway
IndoStar Capital delivered a normalized profitable quarter with PAT of ₹11 crore (vs ₹424 crore loss in Q4 FY26, which included one-time provisioning), driven by stable PPOP of ₹92.9 crore, NIM expansion to 8.8% (from 6.2% YoY), and disciplined credit cost management despite ₹62 crore of technical write-offs. Disbursements grew 44% YoY to ₹1,235 crore, supported by a 30% larger field sales force, 468 branches (target 500+), and continuous underwriting tightening that pushed the prime customer (CIBIL >725) share to 84% and reduced early delinquency to 2.29% (vs 5.5% YoY). Micro LAP scaled to ₹217 crore AUM with GNPA of 0.17%, and expansion into UP and Bihar begins August–September, targeting AUM doubling in FY27. Management reiterated FY29 guidance of 35% CAGR disbursement growth and PAT of ₹450–500 crore, with Q2 FY27 disbursements tracking at 35%+ and the last high-cost borrowing tranche (~₹250 crore at 13%) to be repaid in Q2. Key watch points: old book run-off (80% of NPAs) driving credit cost normalization over the next 2–3 quarters, convergence of cost of funds toward 9% by March, and macro risks from West Asia tensions and El Nino-affected monsoon.