Detailed Narrative
Strong Financial Performance in H1 FY26
Dar Credit & Capital Ltd. reported a robust first half of FY26. Total income for H1 FY26 reached Rs. 2301.26 lakhs, marking an 11.4% year-on-year increase. Profit Before Tax (PBT) grew by 26.0% to Rs. 535.34 lakhs, and Profit After Tax (PAT) saw a significant jump of 36.3% to Rs. 452.35 lakhs. The net profit margin for H1 FY26 stood at 19.66%, an improvement of 360 basis points, demonstrating consistent growth and healthy margins.
Improving Asset Quality and Dividend Declaration
The company's asset quality showed positive trends, with Gross Non-Performing Assets (GNPA) improving to 1.29% as of September 2025. Management attributes this to both an improving sector and enhanced collection management. Reflecting confidence in its performance, the board declared an interim dividend of 5% for the financial year 2025-26, a first for the company, rewarding shareholders due to decent profits and ample liquidity.
Business Correspondent Model Expansion
DCCL is actively expanding its business correspondent model through partnerships with entities like SIDBI, ESAF, Kaleidofin, and Kisan Dhan. This model provides access to funds on tap while maintaining margins. For the Kaleidofin partnership, the company expects monthly disbursements to grow to Rs. 1 crore in Q3 and Rs. 2 crore in Q4. Similarly, for Kisan Dhan, disbursements are projected to be Rs. 50 lakhs per month in Q3, increasing to Rs. 1-1.5 crores per month in Q4. The company targets a business correspondent portfolio of Rs. 30-40 crores by end of FY26 and Rs. 80 crores by FY27.
Strategic Focus on Unique Lending Segments
The company primarily focuses on four types of projects, including personal loans to municipal employees (safai karamcharis), secured MSME loans (Rs. 2-5 lakhs ticket size), and unsecured MSME loans (Rs. 50,000-2 lakhs ticket size). The personal loan product for municipal employees is highlighted as unique, with direct EMI deductions from municipalities, resulting in near-zero bad debt. This focus on a niche, underserved segment with direct collection mechanisms provides a competitive advantage and contributes to the low NPA levels.
Funding and Liquidity Management
DCCL's average term loan yield is 21.23%, with an overall cost of borrowing around 13% (12% from banks, 14-15% from investor sector). The company successfully issued listed and rated debentures of Rs. 10 crore in September and raised Rs. 65 crores in H1 FY26. Plans are in place for an additional NCD issuance of Rs. 25-30 crores in H2. Management emphasizes maintaining high liquidity, ensuring cash reserves equivalent to two months of repayment obligations, and expects margins to be maintained or improve due to IPO proceeds and better negotiation power with lenders.
Digital Adoption and Branch Network Expansion
While the customer onboarding process is fully digital, the company primarily relies on physical sourcing and 'touch banking' for loan origination, especially for its semi-urban customer base which may lack digital literacy. The company is expanding its physical footprint, having opened its first branch in Miryalaguda, Telangana, and aims to increase its total branches from 36 to 42 by FY26. Technology also supports GNPA reduction through data analytics and E-NACH, though physical follow-up remains critical for collections.