Fedbank Financial Services Limited — Q1 FY27 earnings call

Call held 15 Jul 2026

Management summary

Fedbank Financial Services Limited reported a strong Q1 FY27 with AUM growing 35% YoY to ₹21,136 Cr, driven by a 77% increase in Gold Loan AUM. Profit after tax surged 52.5% YoY to ₹114.4 Cr, and RoE expanded to 15.4%. The company maintained credit costs at 0.8% despite regulatory changes in gold loan LTVs, which are expected to optically increase overdue levels but are not seen as an asset quality concern.

Highlights

  • AUM grew 35% YoY to ₹21,136 Cr, demonstrating strong overall business expansion.

  • Gold Loan AUM increased 77% YoY to ₹11,191 Cr, leading the growth across segments.

  • Profit after tax (PAT) of ₹114.4 Cr, a significant YoY growth of 52.5%, indicating robust profitability.

  • Return on Equity (RoE) crossed 15% to 15.4%, an expansion of 380 bps YoY, reflecting improved capital efficiency.

  • Credit costs remained at 0.8%, well within the guided range of below 1%, showcasing prudent risk management.

Concerns

  • RBI revised LTV framework for gold loans (effective April 1), requiring LTV calculation on total amount due, which is expected to result in optically elevated overdue levels in the near term.

  • Negative direct assignment income of ₹13 Cr during the quarter, a deliberate choice to reduce reliance on direct assignment.

  • CRAR reduced to 20.71% from 22.4% in Q4, partly attributable to the shrinkage of the co-lending (CLM) book being brought onto the balance sheet.

Key financials

  1. AUM ₹21,136 Cr +35%YoY
  2. Disbursements ₹6,760 Cr +14%YoY
  3. PAT ₹114.4 Cr +52.5%YoY
  4. RoA 2.6%
  5. RoE 15.4% +38%YoY
  6. GNPA 1.6% -0.3%QoQ
  7. Net NPA 1% -0.3%QoQ
  8. Provision Coverage Ratio 38.4%
  9. Credit Cost 0.8% +0.06%QoQ
  10. Core Net Interest Income — +40.6%YoY
  11. NII (net of DA income) — +38.7%YoY
  12. Operating Expenses — -2.4%QoQ
  13. PPOP ₹187.5 Cr +50%YoY
  14. Opex as % of Avg Total Assets 4.8% -0.7%QoQ
  15. Cost-to-Income Ratio 52.8%
  16. CRAR 20.7%
  17. Gold Loan LTV on AUM 67.9%

What they filed

Q1 FY27: revenue up 29.6%, net profit up 52.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue513 530 536 517 535 +4%555 +5%616 +15%670 +30%
Net profit65 19 72 75 80 +23%88 +363%101 +40%114 +52%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of AUM
₹20,968 Cr Total
  • Gold Loans ₹11,191 Cr 53.4%
  • Mortgage Business ₹9,777 Cr 46.6%

Guidance & targets

AUM Growth

  • Entity-level AUM growth AUM Growth · FY27 · High confidence 20-25%
    The guidance that we have given for this year is that we will grow the entity at about 20% to 25%.

    — Parvez Mulla

  • Gold AUM growth (if price flat) AUM Growth · FY27 · High confidence 25-30%
    Our guidance remains the same, which we have been giving for the past quarter also, that if there is no price drop, and if the price remains flat also over the year, that means, let's say, let's look at March to next March, the price would have remained flat, even then we would have given a gold AUM growth of about 25% to 30%.

    — Parvez Mulla

  • LAP segment AUM growth AUM Growth · FY27 · High confidence 20%
    So if gold without the price increase grows at 25% to 30%, the LAP segment will also grow at 20%.

    — Parvez Mulla

  • Mortgage AUM growth AUM Growth · FY27 · High confidence 15-20%
    And the mortgage AUM will grow between 15% to 20%.

    — Parvez Mulla

Profitability

  • RoA expansion Profitability · FY27 · High confidence 20-30 bps

    From 2.4% today

    What we have guided, Rahul, for the year FY '27 start, I had guided that we will expand the ROA by about 20 to 30 bps over the average ROA, that we had given last year. Last year, FY '26, we had given an average ROA of about 2.4%.

    — Parvez Mulla

Credit Cost

  • Credit cost Credit Cost · FY27 · High confidence sub-1%
    At the start of the year itself, we said the credit cost guidance will be sub-1%.

    — Parvez Mulla

Branch Expansion

  • Number of new branches Branch Expansion · FY27 · High confidence 200
    This year, we plan to add 200 branches. Our guidance remains, we have not changed our guidance. We will continue to add 200 branches Q1, we identified the premises. We did all the work, but we've not opened them.

    — Parvez Mulla

What to watch in Q2 FY27

Normalization of co-lending business

Next few quarters (Q2/Q3 FY27)
Current Leverage increased from 4.6 to 4.89 in Q1 FY27 due to CLM book on balance sheet.
Target Co-lending issues streamlined, helping de-leverage.

Why it matters

Impacts balance sheet leverage and interest expenses, crucial for capital efficiency.

We hope that most of these issues will get streamlined over the next few months and our co-lending business will normalise, helping us de-leverage in the next few quarters

Risks & concerns

  • RBI revised LTV framework for gold loans

    high

    Effective April 1, LTV calculation on total amount due (principal + interest) instead of just principal, expected to result in optically elevated overdue levels in the near term.

    Management acknowledged

  • Gold price volatility

    medium

    Declining domestic gold prices of 15% between Jan 31st to June 30th led to a 7% increase in LTV on AUM, though on-boarding LTVs remain stable.

    Management acknowledged

  • Co-lending business issues and increased leverage

    medium

    Transition-related issues with new regulatory guidelines led to a large part of CLM business being booked on the own balance sheet, increasing leverage from 4.6 to 4.89 and raising interest expenses by 10 bps.

    Management acknowledged

  • Elevated overdue levels in gold loans due to new LTV framework

    medium

    Customer repayment behavior will take time to re-adjust to the periodic interest-due structure, leading to reported overdue levels being elevated, though not considered an asset quality concern.

    Management acknowledged

Q&A highlights

7 direct
Impact of new RBI LTV guidelines on gold loans and competitive positioning. Direct
RBI change is earlier, the industry was doing bullet loans, the regulator has permitted that you can go up to 85% on certain ticket sizes in certain categories. But, if you go 85% on bullet loans, then you have to subtract the interest upfront. That means you'll have to subtract 15% interest if you're charging, then the LTV at sourcing comes down. So, what has happened is, because of that, across the industry, most of the players will be looking at offering the customers quarterly products, which means that the quarterly dues will get created. So that is the change, which has happened.

Clarifies the operational and competitive implications of a significant regulatory change for a core business segment, including the shift to periodic interest-due products.

Asked by Digant Haria

Gold price correction and growth outlook for gold loans. Direct
Our guidance remains the same, which we have been giving for the past quarter also, that if there is no price drop, and if the price remains flat also over the year, that means, let's say, let's look at March to next March, the price would have remained flat, even then we would have given a gold AUM growth of about 25% to 30%.

Provides specific growth guidance for the gold loan segment under a key market condition (flat gold prices), emphasizing tonnage growth and LTV expansion.

Asked by Digant Haria

Volume hit in gold loan disbursements due to new regulations and gold price movements. Partial
Rajiv, it's the reverse, which has happened. If you look last financial year's Q1, we were actually degrowing in our tonnage and whatever growth that we had seen was purely the impact of the price movement. And to answer you about the ticket sizes, the trend after new regime, for this quarter, even after complete alignment to the new regime - The assessment methodologies, the purpose-based lending like consumption and income-generating loan etc., (I believe, even the industry is aligned), what we are seeing is there is a skew towards loans getting disbursed at a ticket size more than INR2.5 lakhs.

Addresses concerns about potential volume impact from regulatory changes and clarifies that the growth is real, with a shift towards higher ticket sizes (>₹2.5 lakhs).

Asked by Rajiv Mehta

Credit cost trajectory for the rest of FY27 given current PCR and Q1 uptick. Direct
Overall, Renish, the credit cost guidance remains same. At the start of the year itself, we said the credit cost guidance will be sub-1%. And as far as the mortgage GNPAs are concerned, they are tracking well. We're not seeing anything on the West Asia crisis hitting us as of now. I don't know how it will in Q2, the monsoon effect in Q2, Q3. So, we are well within the guidance.

Reaffirms credit cost guidance of sub-1% and provides confidence in asset quality management despite optical changes from new gold loan regulations.

Asked by Renish

Impact of shift from higher tenure to monthly repayment gold loans on blended yields/spreads. Direct
The yields, if you remember, last year also, we had said not because of the mix., the yield pressure is coming more in the respective products, which is a LAP that is facing a yield pressure. I'm operating at a particular yield of about 12%, 12.5%. That is coming under pressure. And gold, we will try and see how the competition operates with a combination of LTV and yield. So individual products will have to behave particularly in those geographies. So I don't see a mix issue coming in, more of a product-related play, which will happen in Q1 and Q2.

Clarifies that yield pressure is more product-specific (LAP) than due to changes in gold loan repayment frequency, and management is actively managing LTV/yield.

Asked by Renish

Status of branch expansion for FY27, given no new branches in Q1. Direct
So Devansh, thank you so much. That's a good question. Last year, we added about 150 branches. This year, we plan to add 200 branches. Our guidance remains, we have not changed our guidance. We will continue to add 200 branches Q1, we identified the premises. We did all the work, but we've not opened them. So there are unfinished branches, which are across the country. There were new territories we were getting into. And those openings could not be done. That is why we couldn't disclose the number. So you will hear us disclosing the number in Q2, but that has happened in Q1.

Reaffirms the 200-branch expansion target despite Q1 delays and explains the reason, indicating a catch-up in Q2, which is crucial for distribution.

Asked by Devansh Dhruv

Details on write-offs, fair value loss, and LAP assignment loss. Direct
We wrote off a little above 50 crores. which resulted in a 30-bps reduction in the GNPA. So that's where that is there. Now the FVOCI number you see, okay? There, what we have done is, in terms of the change of classification of certain assets from FVOCI to an amortized cost basis. When we do fair valuation, there is a derecognition of ECL on that. When we have classified it back into amortized cost, there is a re-recognition of the ECL provision. So which is what has also resulted in addition to the PCR and it has also resulted in the number you mentioned in the P&L.

Clarifies the accounting treatment and impact of write-offs (~₹50 crores) and FVOCI reclassification on financial metrics, explaining the 30 bps GNPA reduction.

Asked by Pawan Kumar

Increasing Net Stage 3 percentage of mortgage and how it will be tackled. Direct
In the last call, the March call, we had mentioned that we have significantly beefed up the collections team. The intensity on the ground is very high in terms of collection effort. Now there are multiple conversations happening with some of our delinquent customers. Wherever there is a property involved and where the ability to enforce SARFAESI is a little limited. So it's a very lengthened process. So it takes time for resolution.

Highlights a specific asset quality concern in the mortgage segment and management's strategy to address it through enhanced collections efforts and legal processes.

Asked by Ghansham Joshi

3 min read 7 chapters

Detailed narrative

Q1 FY27 Performance Overview

Fedbank Financial Services reported robust Q1 FY27 results, with AUM growing 35% YoY to ₹21,136 Cr and disbursements increasing 14% YoY to ₹6,760 Cr. Profit after tax (PAT) saw a significant 52.5% YoY growth, reaching ₹114.4 Cr, while Return on Equity (RoE) expanded by 380 bps YoY to 15.4%. The company maintained credit costs at 0.8%, within its guided range, and improved its Cost-to-Income ratio by over 400 bps sequentially to 52.8%.

Gold Loan Segment Dynamics and Regulatory Impact

The Gold Loan business continued to be a primary growth driver, with AUM increasing 77% YoY to ₹11,191 Cr and disbursements rising 15% YoY to ₹6,087 Cr. Despite headwinds from a 15% decline in gold prices (Jan 31st to June 30th) and new RBI LTV regulations, Gold Loan AUM still achieved an 8.1% QoQ sequential growth. The RBI's revised LTV framework, effective April 1, now calculates LTV on the total amount due, leading the company to adopt a periodic interest-due structure and anticipate optically elevated overdue levels in the near term, though not an asset quality concern.

Asset Quality and Provisioning Adequacy

The company demonstrated improving asset quality, with GNPA reducing by 30 bps to 1.6% from 1.9% in Q4, and Net NPA falling marginally below 1.0% for the first time. Provision coverage increased to 38.36%. The increase in Stage II from 2.2% to 2.7% was primarily attributed to the re-adjustment required by the new gold loan regulations, rather than underlying asset quality deterioration, as collateral remains highly realizable.

Strategic Leadership and Business Focus

Fedbank announced key leadership changes to optimize its business segments. Mr. George Oommen joined as Business Head – Gold Loans, Mr. Shardul Kadam transitioned to Chief Transformation Officer, and Mr. Jagadeesh Rao assumed additional responsibility as CBO for Small Ticket LAP and Home Loans. The company reiterated its strategic focus on Gold Loans and LAP as twin engines for growth, aiming for 20-25% entity-level AUM growth, with Gold AUM projected to grow 25-30% and LAP AUM 15-20%.

Operational Efficiency and Capital Adequacy

Operating expenses declined 2.4% sequentially, contributing to a 50% YoY growth in Pre-Provisioning Operating Profit (PPOP) to ₹187.5 Cr. Opex as a percentage of average total assets improved by 70 bps QoQ to 4.8%. The Capital Adequacy Ratio (CRAR) stood at 20.71%, a decrease from 22.4% in Q4, partly due to the shrinkage of the co-lending (CLM) book being brought onto the balance sheet. The company is actively working to enhance its partner network to conserve capital and support future growth.

Branch Expansion Strategy

The company maintained its guidance to add 200 branches in FY27, following 150 additions last year. While no new branches were opened in Q1, management stated that premises have been identified and preparatory work completed, with openings expected to be disclosed in Q2. This expansion is crucial for enhancing distribution capabilities and penetrating new territories, particularly in states like Orissa and other northern regions, to support its growth strategy.

Shareholding Change and Investor Relations

True North Fund LLP, a long-standing shareholder, exited its entire holding of approximately 25.7 million equity shares (6.86% of equity capital) through a block deal. These shares were acquired by Nomura India Equity Fund. Management expressed appreciation for True North's support and warmly welcomed Nomura India Equity Fund as a new shareholder, looking forward to their participation in the company's growth journey.

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