SAHLIBHFI

Shalibhadra Finance reported a strong Q4 FY26, closing the year with an AUM of 220 crores, marking a 25% growth from 176 crores in FY25. Profit After Tax (PAT) grew 21.67% YoY to 19.48 crores, with a robust Return on Investment (ROI) of 8.65% and Return on Equity (ROE) of 11.33%. The company maintained a nearly 100% secured book and a low Gross Non-Performing Asset (GNPA) of 2.94%, alongside a strong Capital to Risk-weighted Assets Ratio (CRAR) of 78.28%.

The company outlined its 'Shalibhadra 2.0' strategy, anchored by three pillars. First, a strong capital position with a net worth of 172 crores and 78.28% CRAR provides headroom to scale up to 1,000 crores AUM without further equity dilution, leveraging NCDs and term loans. Second, technology is a key differentiator, with deliberate investments in digitization, automation, and AI-led processing across the lending workflow, achieving almost 100% automation in underwriting. Third, the company operates through owned branches, targeting 100 branches by FY27.

FY26 saw the first meaningful step in the 2.0 strategy with the launch of new lending segments including micro-LAP, property loans, home loans, and personal loans. Management confirmed that the target customer segment for these new products remains the existing customer base, allowing for cross-selling. While credit cost for two-wheeler loans is 2%, mortgage loans are expected to have a lower credit cost of 1%, indicating a potentially lower risk profile for these new segments.

Significant investments were made in technology, including proprietary LOS and LMS platforms, managing the full customer journey from digital onboarding to real-time collection monitoring. This automation has led to a reduction in per-branch cost and overall cost-to-income ratio. The company anticipates that technology will continue to drive efficiency and scale, directly translating into faster turnaround times, sharper credit decisions, and better oversight across its branch network.

As of March 31, total borrowing stood at 50 crores, with 40% (20 crores) from nationalized banks. The company aims to increase nationalized bank borrowing to 50-60% in the near term and 60% by FY29, as these banks offer lower interest rates (10-10.5%) compared to the 12% for newly raised NCDs. Management expects a gradual reduction in NCD interest rates as they gain experience. An AUM of 500 crores is expected to lead to an automatic two-notch credit rating upgrade, further improving borrowing costs.

The company's NNPA is currently 1% and is expected to remain in the same range for the next 2-3 years. To manage risks in new segments, Shalibhadra focuses on salaried customers, government employees, and those with significant agricultural assets, good CIBIL scores (above 700), and low leverage. A new Chief Risk Officer was appointed six months ago, implementing new software and stricter credit policies, such as requiring home ownership and increased down payment for new-to-credit customers, to maintain asset quality during expansion.

Shalibhadra plans to expand its branch network from 61 to 100 by FY27, with a target of 70 branches by the current calendar year and 75 by year-end. The broader target is to add one branch per month, aiming for 36 new branches in 36 months. Each new branch requires an initial capex of 20 lakhs (15 lakhs for real estate, 5 lakhs for other expenses) and is expected to break even within 1 to 1.5 years, typically reaching 50 lakhs AUM.

The company targets an AUM of 500 crores by FY29, with a further aspiration to reach 1,000 crores AUM within five years without equity dilution. The portfolio mix by FY29 is projected to be 60% from existing two-wheeler products and 40% from newer products. While the ROA is expected to slightly decline from 8.65% to around 7% in the next 2-3 years due to the shift towards higher-ticket, lower-yield products and competition, the company believes its robust capital, technology, and branch network will support sustainable growth.