Manba Finance Limited — Q1 FY26 earnings call

Call held 5 Aug 2025

Management summary

Manba Finance delivered a robust Q1 FY26, marked by significant growth in AUM, disbursements, NII, and PAT. The company maintained a healthy capital adequacy ratio and strong asset quality metrics (GNPA 3.47%, NNPA 2.64%). While facing sequential interest income decline and increased finance costs, management is strategically adjusting lending policies and exploring new funding avenues to sustain growth and profitability, targeting INR 85-100 crore PAT by FY27.

Highlights

  • Asset Under Management (AUM) grew 43% YoY to INR 1,415 crore.

  • Disbursements increased 27% YoY to INR 165 crore in Q1 FY26, up from INR 130 crore in Q1 FY25.

  • Profit After Tax (PAT) surged 89% YoY to INR 10 crore.

  • Net Interest Income (NII) grew 38% YoY to INR 31 crore, maintaining a healthy Net Interest Margin (NIM) of 12.43%.

  • Capital Adequacy Ratio remained strong at 28.21%.

Concerns

  • Sequential decline in interest income from INR 65.5 crore to INR 63 crore despite AUM growth, attributed to repo rate changes and lower LTV strategy.

  • Increase in finance cost due to maintaining high liquidity (INR 150-200 crore) and not undertaking PTC transactions this quarter.

  • Acknowledged stress in MFI and personal loan segments, leading to a cautious approach and reduced LTV.

Key financials

2 periods

Headline

  • Asset Under Management (AUM)
    ₹1,415 Cr
    YoY +43%
  • Net Interest Income (NII)
    ₹31 Cr
    YoY +38%
  • Net Interest Margin (NIM)
    12.4%
  • Profit After Tax (PAT)
    ₹10 Cr
    YoY +89%
  • Cost of Borrowing
    11.1%
  • Gross Non-Performing Assets (GNPA)
    3.5%
  • Net Non-Performing Assets (NNPA)
    2.6%
  • Capital Adequacy Ratio (CAR)
    28.2%
  • Interest Income (sequential)
    ₹63 Cr
    QoQ -3.8%
  • Other Income
    ₹2 Cr
  • Provision Coverage Ratio (PCR)
    20%
  • Small Business Loan (SBL) AUM
    ₹60 Cr
  • Small Business Loan (SBL) NPA
    2%
  • Overall OpEx to AUM
    8%
  • Matured Branches OpEx to AUM
    4%
  • Newer Branches OpEx to AUM (below 3 years)
    7%

Q1 FY26

  • Disbursement
    ₹165 Cr
    YoY +27%

What they filed

Q1 FY27: revenue up 38.8%, net profit up 30.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue65 69 68 67 78 +20%90 +30%93 +37%93 +39%
Net profit12 13 8 10 11 −8%13 +0%11 +38%13 +30%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Debt Debt disclosed Cost 11.1%
    • New borrowing NCDs issued at 11-11.3% coupons, bank borrowing below 11%.
    The cost of borrowing currently stands at 11.05%.
  • Liquidity Liquidity disclosed Company is keeping INR 150-200 crore liquidity to strengthen balance sheet.
    So, increase in finance cost was due to we are keeping good liquidity with us right now, somewhere around INR 150 crore to INR 200 crore with us to strengthen our balance sheet.

Guidance & targets

AUM Growth

  • AUM Growth AUM Growth · every year · High confidence 30-35%
    So, 30-35% if you grow, then only you will be able to focus and keep a proper bandwidth on the collection side.

    — Manish Shah

Profitability

  • PAT Growth Profitability · every year · High confidence 30-35%
    Okay. So, 30-35% both on AUM as well as on the PAT side, right?

    — Manish Shah

  • PAT Target Profitability · FY27 · High confidence INR 85-100 crore
    So, reaching profitability of INR 85 crore to INR 100 crore FY27 should not be an issue.

    — Manish Shah

Asset Mix

  • Unsecured Portfolio Share Asset Mix · next 2-3 years · High confidence under 10%
    To further clarify that in the next 2-3 years also, the unsecured portfolio will remain under 10% only.

    — Manish Shah

Provisioning

  • Provision Coverage Ratio (PCR) Provisioning · this year · High confidence 26-27%

    Previously 24% → 26-27%

    And last year, we made it 24%. And this year, we are targeting to make it 26% or 27%.

    — Manish Shah

Margin

  • Net Interest Margin (NIM) Margin · Medium confidence around 12.43%
    So, my NIM will remain what has been shown around 12.43, it will remain almost similar to that only maybe because the way we reduce on an LTV ground at the same time, we have started the small business loan that is also a little bit growing and that we are lending almost at 22-24 IRR. So, as a mix of everything, this will support.

    — Manish Shah

Cost of Borrowing

  • Cost of Borrowing Reduction Cost of Borrowing · Medium confidence 1-1.5%
    Fourthly, we are also in a process of two rating agencies where my appraisal is there in the month of August, and we are very positive on getting A-minus. So that also will be a very, very helpful reductions further 50 points to 1% rate of interest.

    — Manish Shah

Operating Efficiency

  • OpEx to AUM Operating Efficiency · coming days · Medium confidence better situation

    From 8-9% today

    Yeah. OpEx will definitely will become better and better the way we will be able to get more and more business from the last in a couple of years joined states such as UP, MP and Chhattisgarh because the OpEx today it is in the range of 8-9% because of the size of the AUM, which keeps on reducing every month on month. So, that will be slightly better situation in the OpEx in coming days.

    — Manish Shah

What to watch in Q2 FY26

PTC transaction for finance cost reduction

Q2 or Q3
Current Not done this quarter
Target Undertake PTC transaction

Why it matters

Could reduce finance cost and improve Net Interest Margin.

But this month, we have not done this quarter. So, we are exploring the PTC transaction in coming quarter, Q2 or maybe Q3.

Risks & concerns

  • Stress in MFI and personal loan segments

    medium

    MFI and personal loan segments are affected, leading to reduced LTV to ensure customer equity and proper loan servicing.

    Management acknowledged

  • Tightness in unsecured loan portfolio

    medium

    The scenario for unsecured loans is tight, so the company is taking a very conservative and precautionary approach, aiming to keep this portfolio under 10% of total AUM.

    Management acknowledged

  • De-growth in two-wheeler OEMs (Honda and Hero)

    low

    Honda and Hero showed de-growth in Q1, prompting the company to add 8 new locations in UP to cover the gaps and maintain growth.

    Management acknowledged

Q&A highlights

8 direct
Sequential decline in interest income despite AUM growth Direct
So, the decrease in the interest income is due to the change in the repo rate and everything. So, we have to also reduce the rate of interest to the customer. So, that's why there was a slight decrease, we can say, in the interest total income. ... Secondly, on the same line, from the January to tighten our credit, we have restricted our loan to value. And for that, we are offering a low rate of interest. So eventually, it is going to be helpful for better NPA. So, my gross income has been reduced. That is also one of the reasons.

Explains a counter-intuitive financial trend and highlights strategic shift towards lower LTV and better asset quality.

Asked by Nemin Doshi

Increase in finance cost Direct
So, increase in finance cost was due to we are keeping good liquidity with us right now, somewhere around INR 150 crore to INR 200 crore with us to strengthen our balance sheet. And second, normally, we used to do 2-3 PTC transaction, which gives us the lower rate of interest. But this month, we have not done this quarter.

Clarifies the reason for higher borrowing costs and indicates potential for reduction in future quarters.

Asked by Nemin Doshi

Asset quality concerns and lower LTV strategy Direct
So, our assets so far behaving very nicely. But the moment we all know from September, MFI and personal loan is affected. So, these are some of the customers who are also taking the personal loan and they keep serving both the EMIs here and there. So, that's the reason we have reduced our LTV to once the customer is having a 20-25% of equity, there is a very rare chance that he will not serve this loan properly.

Reveals proactive measures taken to mitigate potential asset quality risks in specific segments.

Asked by Nemin Doshi

Provision Coverage Ratio (PCR) and future targets Direct
Still every YoY, we are increasing the PCR to strengthen our balance sheet because it has started the journey with 10%, then 13%. Then in FY23-24, we made it 16.5%; FY24-25, we made 20%. And last year, we made it 24%. And this year, we are targeting to make it 26% or 27%.

Shows a clear strategy for strengthening the balance sheet and improving provisioning adequacy.

Asked by Nemin Doshi

PAT target of INR 100 crore by FY27 Direct
As far as your second question is concerned, that FY27, we will reach around INR 100 crore. Yes. Because see, the way we are growing from FY23 to FY24, FY24 to FY25 and now every year, 30-35%, we are talking about the growth, but the eventual impact in the PAT will be more because we are leveraging our infrastructure cost, we are leveraging our senior employees who have joined in 1-1/2 to 2 years.

Reaffirms ambitious profitability targets and outlines the drivers (growth, operating leverage).

Asked by Parth Jariwala

Small Business Loan (SBL) customer profile and sourcing Direct
So, first of all, we have an entire relationship manager team who does a cold call, who visits the shops and all, and they discuss with the potential customers and borrowers and then they collect the data point. We are not sourcing a single business from any of the DSA. We have our own team. Mostly, these are the small shopkeepers, traders who are mainly into Kirana shop or a mobile shop or like that and their presence in the business should be minimum of 3-5 years.

Provides insight into the company's strategy and risk management for the small business loan segment.

Asked by Sudharsan Nachimuthu

Two-wheeler industry growth vs company's AUM growth target Direct
So, two-wheeler this year it seems around 10-12%. And as discussing with a lot of OEMs, their prediction for the next year also in the same range versus how we will be able to achieve 30-35% growth because there are a lot of newly operated states in our book, which is UP, MP and Chhattisgarh. And lot of geographies, it is untouched so far. So for us, reaching out to 35% growth AUM should not be a problem.

Explains how the company plans to outgrow the industry by expanding into new geographies and diversifying products.

Asked by Mithun Shah

OpEx to AUM trajectory Direct
Yeah. OpEx will definitely will become better and better the way we will be able to get more and more business from the last in a couple of years joined states such as UP, MP and Chhattisgarh because the OpEx today it is in the range of 8-9% because of the size of the AUM, which keeps on reducing every month on month. So, that will be slightly better situation in the OpEx in coming days.

Indicates potential for operating leverage as newer branches mature and AUM grows.

Asked by Sudharsan Nachimuthu

3 min read 7 chapters

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.

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