India Shelter Finance Corporation Limited

India Shelter Finance Corporation Limited reported a robust Q3 FY26, with gross managed assets growing 31% year-on-year to ₹10,365 crores. Profit After Tax (PAT) increased 33% year-on-year and 5% quarter-on-quarter to ₹128 crores, leading to a Return on Equity (ROE) of 17.1%, up 200 basis points year-on-year. The company's net worth surpassed the ₹3,000 crore mark, reaching ₹3,048 crores. Disbursements for the quarter were ₹977 crores, an 11% YoY growth.

Gross Stage-3 increased to 1.5% and Net Stage-3 to 1.2% as of December 31, 2025. Management clarified this was a strategic decision to move non-paying customers (those with 60-90 DPD) to higher buckets to initiate legal action, rather than a sudden deterioration. They anticipate Stage-3 to decline to 1.3-1.4% by the March quarter-end. Credit cost for the nine months stood at 0.5%, with a full-year guidance of 40-50 bps, and PCR for Stage-3 remained stable at 25%.

The company successfully reduced its bucket cost of funds by 20 basis points quarter-on-quarter to 8.3%, and by 50 basis points year-on-year. Marginal cost of funds in Q3 was 8.1%, down 70 bps year-on-year. Portfolio yield remained stable at 14.9%, and disbursement yield in Q3 was 14.6%. Management emphasized maintaining spreads of over 6% and noted that lending rates for incremental loans have been reduced by 25-30 bps, passing on the benefit of lower funding costs to customers while preserving profitability.

India Shelter added two new branches in Q3, with plans to add another 4-5 in Q4, aligning with its annual target of 40-45 new branches. The company is also advancing its digital journey, with 4-5% of disbursements currently sourced digitally through an in-house digital team. The goal is to increase this to 10% of disbursements in the near term, expecting to reach 9-10% within a couple of quarters, which will boost productivity.

The PMAY 2.0 scheme gained further momentum, with over 2,000 customers having already received subsidies as of December 25, 2025. In Q2 and Q3, the company disbursed to 500-600 PMAY customers each quarter. Management expects increased traction and resolution of technicalities in the new financial year, indicating a growing pipeline for this segment and a positive outlook for its contribution.

OPEX to managed assets (excluding one-time^📎 labor code impact) stood at 4% for the quarter, a 20 basis point reduction year-on-year. The company added approximately 400 employees during the quarter, with about 200-250 specifically for collections, indicating a focused effort to strengthen recovery infrastructure. This is part of a broader strategy to improve operational efficiency and reduce OPEX to AUM by 15-20 bps year-on-year.

Management identified lower ticket size loans (sub ₹5 lakh) as a segment experiencing more delinquency issues compared to higher ticket sizes. To address this, the company plans to improve its scorecard and Business Rule Engine effectiveness for this cohort. The aim is to enhance quality and manage risk in this segment, which still provides good yields, rather than abandoning these customers.