Detailed Narrative
Strong Financial Performance in Q2 FY26
India Shelter Finance Corporation Limited delivered a robust performance in Q2 FY26, with Assets Under Management (AUM) growing 31% year-on-year to ₹9,252 crores. Profit After Tax (PAT) increased by 35% year-on-year to ₹122 crores, contributing to an annualized Return on Equity (ROE) of 17% and a Return on Assets (ROA) of 5.8%. The company's net worth now stands at ₹2,914 crores, reflecting a solid financial position.
Asset Quality Trends and Management
While Gross Stage-3 and Net Stage-3 remained stable at 1.2% and 0.9% respectively, the company observed a spike in 30 DPD to 4.7% and an increase in Stage-2 ratios, primarily attributed to August's performance. Management expressed confidence that these metrics would normalize, expecting 30 DPD to come down to around 4.5%. The company's strong SARFAESI rights and collection mechanisms are crucial in managing asset quality, particularly in the 5-10 lakh ticket size segment where other institutions might face challenges.
Funding and Liquidity Position
The company successfully diversified its borrowing base to over 30 counterparties, with an average borrowing tenure of 8 years. The bucket cost of funds decreased by 10 basis points quarter-on-quarter to 8.5%, with a marginal cost of funds at 8.1% for Q2. India Shelter expects a further 20 basis point reduction in its bucket cost of funds by year-end, targeting an overall cost of fund of approximately 8.3%. Liquidity remains strong with ₹580 crores and an additional ₹1,500 crores in undrawn sanctions, including new sanctions of ₹550 crores from NHB and ₹500 crores from SIDBI.
Growth Outlook and Strategy
India Shelter reaffirmed its guidance for 30-35% AUM growth and 40-45 branch additions year-on-year, despite Q2 disbursements growing at a slower 12% due to temporary factors like rains and GST timing. The company maintains its focus on the self-employed segment in Tier-2 and Tier-3 cities, leveraging its deep experience and robust underwriting. The loan book mix is targeted to remain at 60% Housing Loan and 40% Loan Against Property (LAP), with off-balance sheet strategies (16-18% DA and 10% co-lending) used for funding diversification.
Operational Efficiency and Credit Costs
The company demonstrated improved operational efficiency, with OPEX to AUM decreasing by 30 basis points year-on-year to 4.1% and Cost to Income ratio improving by 170 basis points year-on-year to 35%. Credit costs remained stable at 0.5%, in line with the medium-term guidance of 40-50 basis points. The company also highlighted its proactive customer retention team and the approval of an ESOP scheme for Branch Managers to support talent retention and reduce attrition.
Regional Asset Quality Management
Management provided an update on previously flagged asset quality issues in Madhya Pradesh, confirming that a new leader was hired 7-8 months ago and the situation is now 'on track.' This indicates stabilization and optimism regarding future NPA trends in the region, reflecting the company's ability to address localized challenges through operational adjustments and leadership changes.