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    Indostar Capital

    INDOSTAR
    Financial Services·10 Feb 2026
    Management Summary

    IndoStar Capital reported a strong Q3 FY26 with significant disbursement growth, particularly in vehicle finance, and improved asset quality in newer loan cohorts. Net Interest Income saw healthy year-on-year growth, aided by reduced borrowing costs. However, net profit declined quarter-on-quarter due to a one-time expense, and overall NPAs remained a point of discussion, though management expressed confidence in corrective actions.

    Highlights

    4

    • Disbursements grew 20% QoQ to INR1,117 crores in Q3 FY26, with vehicle finance disbursements increasing 21% QoQ to INR1,087 crores.

    • Net Interest Income (NII) rose 16.1% YoY to INR209 crores, supported by a reduction in incremental borrowing costs to 9.1% from 10.2% in Q3 FY25.

    • Asset quality improved significantly in newer cohorts, with delinquency levels in the calendar year 2025 cohort nearly 50% lower than earlier cohorts.

    • The Micro LAP segment demonstrated strong early traction, recording INR30 crores in disbursements and an AUM of INR128 crores, with yields of about 22%.

    Concerns

    2

    • Gross Stage 3 stood at 4.06% and Net Stage 3 at 1.76%, with an analyst noting an 'upward trend' in NPAs, which management attributed to older cohorts.

    • Net profit for Q3 FY26 was INR8.3 crores, a decrease from INR10.5 crores in Q2 FY26, partly due to a one-time INR4.8 crores impact from wage code changes.

    Key financials

    Single quarter

    08 metrics
    1. 01Disbursements₹1,117 Cr+20.5%QoQ
    2. 02Total Loan Portfolio (AUM)₹7,692 Cr+1.7%QoQ
    3. 03Net Interest Income (NII)₹209 Cr+16.1%YoY
    4. 04Net Profit₹8.3 Cr-21%QoQ
    5. 05Gross Stage 34.1%

    Segment breakdown

    • Vehicle Finance₹1,087 Cr97.3%
    • Micro LAP₹30 Cr2.7%
    Donut· Share of Disbursements

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Debt

    Debt disclosed

    Cost 10.3%

    M&A

    BCP V Multiple Holdings & Florintree

    Other · closed

    Liquidity

    Cash ₹22 crores

    Cash and cash equivalents of INR22 crores, with an additional INR277 crores invested in mutual funds, contributing to the treasury asset.

    Guidance & targets

    12
    CategoryTargetPriority
    NBFC Sector
    Loan Book Growth
    15-17%
    		High
    NBFC Sector
    AUM Growth
    18-19%
    		High
    Vehicle Finance
    AUM
    INR11 lakh crores
    		High
    Vehicle Finance
    AUM Growth (CRISIL)
    16-17% annually
    		High
    Vehicle Finance
    Yield
    17%
    		High
    Secured MSME/LAP
    Growth
    26-27%
    		High
    Disbursements
    Overall Growth
    20%
    		High
    Disbursements
    Sequential Improvement
    continue improving sequentially
    		Medium
    Micro LAP
    Yield
    20%+
    		High
    Micro LAP
    AUM Growth
    double
    		High
    Credit Cost
    Credit Cost
    ~2% plus/minus a few basis points
    		Medium
    Sales
    Frontline Sales Number
    30% increase
    		High

    Disbursement Growth

    next quarter
    Current20% QoQ (INR1,117 crores)
    TargetSequential improvement and continued 20% growth momentum

    Why it matters

    Sustained disbursement growth is key to achieving AUM targets and overall business expansion.

    We expect disbursement to continue improving sequentially as we deepen our footprint and benefit from rising demand across our core segments.

    How to verify

    key_financials.metrics[label='Disbursements'].qoq_growth

    Risks & concerns

    2
    RiskSeverity

    Upward trend in Gross Stage 3 (GNPA)

    GNPA at 4.06% was noted by an analyst as an upward trend. Management attributed this to older cohorts and emphasized that new originations (post-Jan 2025) show 50% lower delinquency. — Analyst acknowledged

    medium

    Impact of one-time wage code changes on net profit

    Net profit for Q3 FY26 was impacted by a one-time charge of INR4.8 crores due to wage code changes. — Management acknowledged

    low

    Q&A highlights

    8

    “If you see our presentation, which will show you on non-starter as well as early delinquency, Slide Number 19, you would see that the new origination after the policy tightening, the delinquency is almost 50% lower. So over a period of time, as this loan book which is created after January becomes a higher percentage of the overall book, this number will automatically come down...”

    Addresses analyst concern on rising NPAs by highlighting significant improvement in new loan cohorts and strategic measures like early warning systems and collection infrastructure.

    asked by Nakul Doshi

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 FY26 Performance Overview

    IndoStar Capital reported total loan portfolio of INR7,692 crores in Q3 FY26, with disbursements reaching INR1,117 crores, a 20% increase QoQ. Net Interest Income (NII) grew 16.1% YoY to INR209 crores. However, net profit for the quarter stood at INR8.3 crores, down from INR10.5 crores in Q2 FY26, partly due to a one-time📎 INR4.8 crores impact from wage code changes. Gross Stage 3 was 4.06% and Net Stage 3 was 1.76%.

    02

    Strategic Focus on Retail-Led Growth

    The company is pursuing retail-led growth, focusing on semi-urban and rural India, with vehicle finance and Micro LAP as core businesses. Following its exit from affordable housing, IndoStar aims to scale disbursements in used vehicle finance and Micro LAP. This strategy positions the company as a secure, scalable, and growth-focused lending platform, targeting underserved and underbanked borrowers.

    03

    Significant Asset Quality Improvements in New Cohorts

    Management highlighted substantial improvements in asset quality, with delinquency levels in the calendar year 2025 cohort nearly 50% lower than earlier cohorts. This improvement is attributed to proactive policy tightening, a comprehensive early warning system, and enhanced collection infrastructure. The company also noted a sharp reduction in non-starters and early delinquencies, providing confidence for future growth.

    04

    Micro LAP Segment Expansion and Performance

    The Micro LAP segment recorded disbursements of INR30 crores in Q3 FY26, with AUM reaching INR128 crores. Loans are offered with tenures up to 10 years, average ticket size of INR6-7 lakhs, and yields around 22%. The segment boasts significant digitization, with nearly 100% customer onboarding via e-applications and e-agreements, and strong credit quality with only 6 customers in 1+ DPD out of 2,215. The company plans to double Micro LAP AUM next year and expand geographically.

    05

    Funding and Liquidity Position

    IndoStar maintains a strong balance sheet with a capital adequacy ratio of 14.4% and a debt-to-equity ratio of 1.2x, indicating significant headroom for growth. The cost of funds eased to 10.3% from 10.8% last year, and incremental borrowing costs reduced to 9.1% from 10.2% in Q3 FY25. The company has a positive cumulative mismatch across all ALM buckets, ensuring a robust liquidity profile.

    06

    Talent and Distribution Enhancement

    To strengthen its vehicle finance business, IndoStar invested in talent, appointing Mr. Amandeep Singh Sandhu as Chief Operating Officer for Vehicle Finance. The company also expanded its network by adding 7 new branches during the quarter and plans to increase its frontline sales force by 30% in the next quarter. These initiatives are expected to drive sustainable high-quality growth.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.