Detailed Narrative
Strong Financial Performance and AUM Growth
Indostar Capital reported a robust Q3 FY25, with consolidated PAT growing 64% year-on-year. The consolidated Assets Under Management (AUM) reached INR10,625 crores, marking a 32% increase YoY and 5% QoQ. Disbursements for the quarter stood at INR1,572 crores, up 17% from the previous year, driven by a strong focus on the retail segment which now constitutes 98% of the total loan portfolio.
Improved Net Interest Income and Margins
The company's consolidated Net Interest Income (NII) for Q3 FY25 was INR241 crores, reflecting a significant 79% YoY increase and a 10% QoQ growth. The Net Interest Margin (NIM) remained stable at 5.6%. This improvement was supported by a 110 basis points reduction in the cost of borrowings year-on-year, with the incremental cost of funds in the December quarter at 10.2%.
Asset Quality Challenges and Outlook
Despite overall positive trends, the standalone GNPA for ICF stood at 4.92%, with Stage 3 assets at 2.72%. Management attributed increased delinquencies and a credit cost of 2.6% in Q3 FY25 to factors like excessive heat waves, extended monsoon, and a slowdown in vehicle turnarounds. However, they expressed optimism that the worst is behind them, with EMI plus overdue collections improving to 95% and a normalized credit cost of 2-2.5% expected in a regular scenario over the next four years.
Niwas Housing Finance (NHF) Performance
The wholly-owned subsidiary, Niwas Housing Finance (formerly IndoStar Home Finance), demonstrated strong growth. NHF reported disbursements of INR281 crores in Q3 FY25, a 25% YoY increase, contributing to a 9-month disbursement of INR753 crores. Its AUM reached INR2,747 crores, growing 34% YTD, with a PAT of INR16.3 crores for the quarter and a healthy RoA of 3% for the 9-month period. The 90-plus DPD marginally increased to 1.10%.
Capital and Liquidity Position
Indostar Capital maintains a robust capital position with a capital adequacy ratio of 28.5% and a debt-to-equity ratio of 2x, providing ample headroom for future growth. The company also received INR205 crores from Brookfield Capital Partners through warrants allotment. Significant liquidity of INR1009 crores and additional undrawn amounts of INR575 crores further bolster its financial strength.
Strategic Focus and Future Plans
The company is committed to expanding its product offerings, including ancillary products like tyre financing, and strengthening its presence in the retail CV operator segment. Management reiterated its focus on technology integration across loan origination, credit appraisal, and collections to enhance operational agility and customer satisfaction. Proceeds from the Housing Finance sale, expected by early Q1 FY26, will be deployed into the CV and MSME Micro Labs businesses.