MAS FINANC SER

MAS Financial Services reported a strong Q2 FY26, marking its 122nd consecutive quarter of robust financial performance. Consolidated AUM grew 18.32% YoY to INR13,821 crores, with consolidated PAT increasing 17.79% YoY to INR91.43 crores. The company reiterated its ambitious long-term vision to achieve INR1 lakh crore AUM within a decade, emphasizing a purpose-led and progress-driven approach that has historically delivered a 20% CAGR in AUM and 22% CAGR in profitability over the last decade (2015-2025).

The company continues to pursue a diversified asset strategy, with MSME loans currently contributing around 75% and other products 25%. The goal is to shift this to 65-70% MSME and 30-35% other products at the INR20,000 crore AUM mark. In terms of distribution, MAS Financial has expanded its reach to 15,000 pin codes and maintains partnerships with approximately 200 NBFCs, which contribute about 35% of its business. The company aims to increase direct distribution to 70-75% over the next 2-3 years.

Asset quality remained stable, with standalone net Stage 3 assets at 1.69% as of September 30, 2025, compared to 1.63% in June 2025. Management targets maintaining net NPA between 1.5% to 2% and gross NPA between 2.5% to 2.75%. Operational costs increased slightly due to lower disbursements, increased staffing for 15,000 distribution points, and commissions to fintech partners. The company aims to keep its opex ratio between 2-3% of assets or 35-38% of interest income, focusing on technology adoption with a 100-person tech team and in-house tech stack development.

MAS Financial is strongly positioned with a capital adequacy ratio of 24.57% and Tier 1 capital at 22.7%. The debt-to-equity ratio stood at 3.39x. The company raised INR900 crores through term loans and INR450 crores via NCDs during the quarter. The average cost of borrowing for the quarter was 9.62%, 21 basis points lower YoY, with incremental borrowing at 9.25%. Management aims to maintain a debt-to-equity ratio of 4-4.5% to achieve ROEs of 15-17% in the long term.

The housing finance subsidiary (MRHMFL) showed strong growth, with AUM increasing 23.65% YoY to INR821.70 crores and PAT up 25.90% to INR2.99 crores. Net Stage 3 assets for MRHMFL were 0.66%. The company plans to grow this subsidiary at 30-35% annually, targeting INR4,000-5,000 crores AUM in the next 3-4 years before considering a separate listing. Additionally, MAS Financial received IRDAI approval for its insurance broking business, MASFin Insurance Broking, which will initially focus on captive business.

Management acknowledged that the MSME sector has been challenging for the past four quarters, primarily due to past overleverage by lenders, which is now stabilizing. They expressed confidence that the challenging cycle is concluding, with an increase in eligible borrowers observed in September and October. The company anticipates Q3 growth of 5-7% QoQ and a return to 20-25% AUM growth in the near term, driven by improving market conditions and a focus on risk management.

Analysts raised concerns about the increasing DPD (Days Past Due) and opex ratio. Management clarified that DPD volatility in less than 90 days is expected but that the overall asset quality remains range-bound and within control. The higher opex was attributed to lower disbursements, increased employee costs for expanding distribution, and commissions to fintech partners. Management expects opex to normalize as AUM grows and efficiencies improve, without impacting ROA, which is targeted at 2.75-3%.