MAS Financial Services Limited — Q3 FY25 earnings call

Call held 30 Jan 2025

Management summary

MAS Financial Services Limited delivered a robust Q3 FY25 performance, achieving over 21% consolidated AUM growth and 25% consolidated PAT growth, while maintaining asset quality. The company continues its strategic focus on MSME, with increasing contributions from wheels and personal loans, and is well-capitalized to support future growth. Management acknowledged a challenging macroeconomic environment but expressed confidence in their risk management and distribution strategies.

Highlights

  • Consolidated AUM grew 21.17% YoY to ₹12,379 crores.

  • Consolidated PAT increased 25% YoY to ₹80.40 crores.

  • Standalone AUM grew 21% YoY to ₹11,667 crores.

  • Standalone PAT increased 25% YoY to ₹78 crores.

  • Housing Finance AUM grew 29% YoY to ₹701 crores.

  • Cost of borrowing remained stable at 9.84% in Q3 FY25 compared to 9.86% in the same quarter last year.

  • Capital Adequacy Ratio (CAR) stood strong at 25.34%, with Tier-1 capital at 23.13%.

  • Declared an interim dividend of 10% (₹1 per share) on face value.

Concerns

  • Stress in Micro-Enterprise Loan (MEL) portfolio

Key financials

  1. Consolidated AUM ₹12,379 Cr +21.2%YoY
  2. Consolidated PAT ₹80.4 Cr +25%YoY
  3. Standalone AUM ₹11,667 Cr +21%YoY
  4. Standalone Total Income ₹390 Cr +21%YoY
  5. Standalone PAT ₹78 Cr +25%YoY
  6. Cost of Borrowing 9.8%
  7. Capital Adequacy Ratio 25.3%
  8. Tier-1 Capital 23.1%
  9. Debt-Equity Ratio 3.22×
  10. Standalone Gross Stage-3 2.4%
  11. Standalone Net Stage-3 1.6%

What they filed

Q1 FY27: revenue up 19.9%, net profit up 25.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue365 390 417 443 456 +25%481 +23%514 +23%531 +20%
Net profit77 78 81 84 90 +17%90 +15%100 +23%105 +25%
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.

Segment breakdown

Share of AUM
₹12,379 Cr Total
  • Microenterprise Loan (MEL) ₹4,705 Cr 38.0%
  • SME Loan ₹4,273 Cr 34.5%
  • Commercial Vehicle ₹969 Cr 7.8%
  • Salaried Personal Loan (SPL) ₹922 Cr 7.4%
  • Two-wheelers ₹809 Cr 6.5%
  • Housing Finance Subsidiary ₹701 Cr 5.7%

Guidance & targets

AUM

  • Overall AUM Growth AUM · ongoing · Medium confidence 20-25%
    We continue to maintain the guidance that we will grow anywhere between 20 to 25%.

    — Kamlesh Gandhi, Chairman and Managing Director

  • Medium-term AUM Target AUM · by March '28 · High confidence ₹20,000 crores
    We should be touching 20,000 crores by March '28. That guidance stands.

    — Kamlesh Gandhi, Chairman and Managing Director

  • Housing Finance Subsidiary Growth AUM · going forward · Medium confidence 25-30%
    And we see that Company also registering a strong growth anywhere between 25% to 30% going forward depending upon the situation and the opportunity we get from time to time.

    — Kamlesh Gandhi, Chairman and Managing Director

AUM Composition

  • Salaried Personal Loan (SPL) Limit AUM Composition · coming 2 to 3 years · High confidence not exceeding 10% of AUM
    And within overall strategic intent, if you say that we don't want to increase our salary personal loan for coming 2 to 3 years beyond 10% of our AUM.

    — Kamlesh Gandhi, Chairman and Managing Director

  • Direct Assignment & Co-lending AUM AUM Composition · ongoing · High confidence 20-25% of AUM
    As a strategy, we aim to maintain around 20% to 25% of the AUM as out book through direct assignment and co-lending transactions.

    — Ankit Jain, CFO

  • MSME Business Contribution AUM Composition · going forward · High confidence around 60% of business
    But going forward, we have a very clear-cut strategic intent to focus on our MSME business, which should contribute around 60% of the business.

    — Kamlesh Gandhi, Chairman and Managing Director

  • Wheels Business Contribution AUM Composition · going forward · High confidence 25-30%
    25% to 30% should come from wheels and the rest less than around 10% from unsecured personal loans.

    — Kamlesh Gandhi, Chairman and Managing Director

  • Unsecured Personal Loans Contribution AUM Composition · going forward · High confidence less than around 10%

    — Kamlesh Gandhi, Chairman and Managing Director

  • Retail Asset Channels (NBFC partners) AUM Composition · ongoing · High confidence 30-35%
    From the risk perspective, technically we would not like this business to be more than around 30%, 35%.

    — Kamlesh Gandhi, Chairman and Managing Director

Cost of Funds

  • Cost of Borrowing Cost of Funds · going forward · High confidence stable
    So, the cost of borrowing has remained stable, and we expect it to remain stable going forward too.

    — Ankit Jain, CFO

Operating Expenses

  • OPEX as % of AUM Operating Expenses · medium-term · Medium confidence 2.75-3%
    As of now, as we see, OPEX from current 2.2%, 2.2%, right? 2.2 or 2.3% on a medium-term basis can be anywhere between 2.75% to 3%.

    — Kamlesh Gandhi, Chairman and Managing Director

Asset Quality

  • Commercial Vehicle 90 DPD Asset Quality · going forward · High confidence around 5%
    See, as far as commercial vehicle is concerned, I think our 90 DPD is around 5%, and that is in sync or as best as the industry can have. And going forward, we would like to maintain this level.

    — Kamlesh Gandhi, Chairman and Managing Director

Risks & concerns

  • Stress in Micro-Enterprise Loan (MEL) portfolio

    high

    Borrowers in MEL are over-leveraged or vulnerable to slowdown, leading to higher stress compared to other products.

    Management acknowledged

  • Challenging macroeconomic environment

    medium

    The overall situation in the market remains challenging, requiring caution from lenders.

    Management acknowledged

  • Some stress in SME portfolio pockets

    medium

    Certain pockets within SME are experiencing stress, though better documentation allows for more adequate assessment.

    Management acknowledged

  • Delinquencies inching up in used Commercial Vehicle (CV) segment

    medium

    Industry-wide observation of rising delinquencies in used CVs, though MASFIN's portfolio is small.

    Analyst acknowledged

  • Industry-wide stress in MFI loans and stabilization timeline

    medium

    Management expects another quarter or two before the MFI industry can work normally due to tightened credit screens.

    Management acknowledged

  • Higher rejection ratios due to tightened credit screens and customer financial deterioration

    low

    Increased rejections are a result of internal policy tightening and stagnated/deteriorated balance sheet/income numbers for customers.

    Management acknowledged

Q&A highlights

3 direct
Product segments and geographies facing stress in the current macroeconomic environment Direct
So, overall, to summarize, MEL, the micro enterprise loans, the small business class entrepreneurs are the ones which are facing more problems at the ground level.

Identifies Micro-Enterprise Loans (MEL) as the segment experiencing the most significant stress, guiding investor focus.

Asked by Abhijit Tibrewal

High growth in Salaried Personal Loans (SPL) despite industry-wide stress in this segment Direct
Number second, we don't deviate from our fundamentals of discovering growth rather than just targeting growth. If we get an opportunity within our credit screens, within our understanding, within the parameters whereby we can maintain the asset quality, we would not mind allocating more capital there. And within overall strategic intent, if you say that we don't want to increase our salary personal loan for coming 2 to 3 years beyond 10% of our AUM.

Explains the rationale for SPL growth, emphasizing adherence to credit screens and a strategic cap on portfolio contribution, mitigating concerns about aggressive growth.

Asked by Ankit Gupta

Stress in Micro Enterprise Loans (MEL) and the solvency/protection regarding NBFC partners Direct
So, under any stress position, they should be above the threshold of 15%. So, currently, all the NBFCs, I will not use the word majority, all the NBFCs whom we work with have no solvency risk irrespective of the fact that their delinquency might range from 2% to 6% depending upon the areas they are working or depending upon the products they have offered.

Provides assurance on the quality and solvency of NBFC partners, highlighting robust assessment systems and long-standing relationships, which is crucial given MEL segment stress.

Asked by Shreepal Doshi

3 min read 7 chapters

Detailed narrative

Q3 FY25 Consolidated and Standalone Performance

MAS Financial Services Limited reported a strong Q3 FY25, with consolidated AUM reaching ₹12,379 crores, marking a 21.17% year-on-year growth. Consolidated Profit After Tax (PAT) increased by 25% to ₹80.40 crores. On a standalone basis, AUM grew 21% to ₹11,667 crores, and PAT also saw a 25% increase, reaching ₹78 crores. Total income for the standalone entity rose 21% to ₹390 crores, while Profit Before Tax (PBT) increased by 24.36% to ₹105 crores.

Asset Quality and Risk Management Focus

Despite a challenging macroeconomic environment, the company maintained its asset quality. The standalone Gross Stage-3 asset was 2.41% (up slightly from 2.36% in Q2 FY25), and Net Stage-3 asset was 1.62% (up from 1.57%). Management emphasized prioritizing risk management and profitability over mere growth, noting that any slight upticks in delinquencies are understandable given market conditions. The company continues to tighten credit screens and origination in certain areas to minimize risk.

AUM Composition and Strategic Intent

The AUM portfolio remains diversified, with Microenterprise Loans (MEL) at ₹4,705 crores (8.28% growth), SME loans at ₹4,273 crores (24% growth), two-wheelers at ₹809 crores (21% growth), commercial vehicles at ₹969 crores (47% growth), and salaried personal loans (SPL) at ₹922 crores (69% growth). The strategic intent is to maintain MSME as the major contributor (around 60%), with wheels contributing 25-30%, and unsecured personal loans remaining below 10% of the AUM.

Liability Management and Capital Adequacy

The company is well-capitalized with a Capital Adequacy Ratio (CAR) of 25.34% and Tier-1 capital of 23.13%, providing ample room for future growth. The cost of borrowing remained stable at 9.84% in Q3 FY25, compared to 9.86% in the previous year's corresponding quarter, and is expected to remain stable. The company raised ₹675 crores through term loans and ₹375 crores through NCDs during the quarter, maintaining a positive structural liquidity position.

Housing Finance Subsidiary Performance

The housing finance subsidiary demonstrated strong growth, with AUM increasing 29% year-on-year to ₹701 crores. Total income grew 24% to ₹20 crores, and PAT increased 19% to ₹2.39 crores. The asset quality for the housing finance subsidiary remained robust, with Gross Stage-3 at 0.96% and Net Stage-3 at 0.70%, including buffer provisions. Management expects this subsidiary to continue growing at 25-30% and become a significant value creator.

Operational Efficiencies and Technology Adoption

MAS Financial Services is enhancing operational efficiencies through technology. The Loan Origination System (LOS) is in place for all products, and a BRE-enabled LOS is expected to launch by March, further improving risk management. The company is also expanding its in-house technology team, which now exceeds 100 members. Direct distribution is being strengthened through 200 branches covering over 14,000 pin codes, complemented by partnerships with NBFCs and FinTechs.

Industry Environment and Outlook

Management acknowledged that the ground situation remains challenging, particularly for micro-enterprise loans (MEL) and certain pockets of SME. They anticipate another one or two quarters before the MFI industry stabilizes. Despite these headwinds, the company is confident in achieving its medium-term AUM target of ₹20,000 crores by March '28, driven by its cautious lending approach, strong risk management, and diversified distribution channels.

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