Detailed Narrative
Strong Financial Performance in Q1 FY26
Manba Finance reported robust growth in Q1 FY26, with Asset Under Management (AUM) increasing 43% YoY to INR 1,415 crore. Disbursements for the quarter reached INR 165 crore, a 27% YoY rise from INR 130 crore in Q1 FY25. Profit After Tax (PAT) saw a significant 89% YoY jump to INR 10 crore, driven by a 38% YoY growth in Net Interest Income (NII) to INR 31 crore, maintaining a healthy Net Interest Margin (NIM) of 12.43%.
Strategic Adjustments to Lending and Asset Quality
Despite overall growth, the company observed a sequential decline in interest income from INR 65.5 crore to INR 63 crore, attributed to changes in repo rates and a strategic decision to reduce Loan-to-Value (LTV) ratios. This LTV reduction, particularly in MFI and personal loan segments, is a proactive measure to mitigate potential asset quality risks. The company's Gross Non-Performing Assets (GNPA) stood at 3.47% and Net Non-Performing Assets (NNPA) at 2.64% as of June 30, 2025, with a current Provision Coverage Ratio (PCR) of 20-25%.
Strengthening Provisioning and Balance Sheet
Manba Finance is committed to enhancing its Provision Coverage Ratio (PCR), targeting 26-27% for the current year, up from 24% last year and 20% in FY24-25. This continuous increase aims to strengthen the balance sheet and provide a buffer against credit losses, which historically remain below 1% for the company. The Capital Adequacy Ratio (CAR) stands strong at 28.21%, supporting future growth initiatives.
Funding Mix and Cost of Borrowing Dynamics
The overall cost of borrowing for the company is 11.05%, with bank borrowings currently below 11% and NCDs issued at 11-11.3%. The company maintained INR 150-200 crore in liquidity this quarter, which contributed to a higher finance cost as PTC (Pass-Through Certificate) transactions were not undertaken. Management expects a 1-1.5% reduction in borrowing costs from various initiatives, including potential repo rate pass-throughs and a positive outcome from upcoming rating appraisals in August, which could lead to an A-minus rating.
Diversified Product Portfolio and Geographic Expansion for Growth
Manba Finance offers a range of financial solutions including two-wheeler, three-wheeler, used cars, small business loans, and top-up loans. While two-wheelers constitute 82% of AUM, the company aims to reduce this to 65-70% in three years by growing EV financing, three-wheeler, and used car segments. The company operates in 76 locations across 6 states and plans to leverage newly operated states like UP, MP, and Chhattisgarh to achieve its 30-35% AUM growth target, even amidst a 10-12% two-wheeler industry growth.
Operating Leverage and Profitability Outlook
The company anticipates reaching a PAT of INR 85-100 crore by FY27, driven by sustained AUM growth of 30-35% and operating leverage. This will be achieved by optimizing infrastructure costs and leveraging senior employees in newer geographies. OpEx to AUM, currently in the 8-9% range, is expected to improve as branches mature and AUM expands, with matured branches already operating at 4% OpEx to AUM, indicating significant potential for efficiency gains.
Small Business Loan Segment Strategy and Performance
The small business loan segment, with an AUM of INR 60 crore and 2% NPA, is managed by an internal relationship manager team that conducts cold calls and visits shops. The company focuses on small shopkeepers and traders with 3-5 years in business and existing lender relationships. While performing well, the company will not aggressively grow this unsecured segment, aiming to keep it below 10% of the total unsecured portfolio, reflecting a cautious approach in this tight market.