DCCL

Dar Credit & Capital Ltd. reported a strong Q3 FY26, with income reaching INR 1,260.90 lakhs and net profit at INR 252.07 lakhs. The company achieved an EPS of 1.77 Rs for the quarter. Notably, the PAT margin expanded to 20%, marking the highest in the last five quarters, attributed to improved leverage and cost discipline. For the nine months ended December 2025, net profit stood at INR 704 lakhs, with an EPS of 5.27 Rs, already surpassing 85% of the full year FY25 PAT, positioning the company for record annual profitability.

The company maintains a robust Capital Adequacy Ratio (CAR) of 43.84%, significantly above the RBI's minimum requirement of 15%, indicating strong capitalization for future growth. Current borrowings stand at INR 159 crores, with a substantial headroom to borrow up to INR 500 crores given a net worth exceeding INR 100 crores. The cost of borrowing has seen a reduction due to the issuance of INR 20 crores in NCDs with coupon rates of 12-12.5%, which are lower than typical bank borrowings of 12-13%.

The total loan book, including own and managed books, reached INR 213 crores. The portfolio is strategically diversified with INR 82 crores in municipal loans, INR 70 crores in unsecured MSME, INR 50 crores in secured portfolio, and INR 11 crores in managed portfolio. Management emphasized a focus on municipal loans and secured MSME, noting significant growth in these segments (municipal loans from INR 76.5 crores to INR 82.5 crores, secured MSME from INR 30 crores to INR 50 crores since FY25). These segments are favored due to their sustainability and minimal NPA/delinquency rates.

Dar Credit & Capital employs a disciplined credit underwriting process, combining analytics with technology-enabled origination and collections. The company's GNPA stood at 1.5% and NNPA at 0.96%, reflecting strong asset quality. Management highlighted a 'mindful game' approach for secured loans, involving property mortgaging and co-applicant structures to mitigate risk. They also noted that their target borrower segment consists of established small businesses and municipal employees, distinct from the struggling microfinance sector, contributing to better collection efficiency.

Digital transformation initiatives have successfully reduced turnaround time and cost to serve. The company's underwriting process integrates digital and personal touchpoints, including a scoring approach and manual intervention. KYC verification and income assessment are fully digitalized. An app-based solution is under trial to enable employees to manage entries from the borrower's point, aiming for faster operations. Management believes personal touch remains crucial for high collection rates and low NPA rates.

The company projects its AUM to reach INR 230-235 crores by the end of FY26 and exceed INR 300 crores by FY27. To support this growth, an additional INR 100 crores in borrowing is planned for FY27, bringing total borrowings to around INR 250 crores. Management aims to maintain the current PAT growth and expects an increase in EPS for FY27. Geographical expansion into Bihar, Jharkhand, and Rajasthan is a key strategy to drive growth in secured and unsecured MSME lending, with an average monthly disbursement target of INR 14-15 crores.