Suryoday Small Finance Bank Limited — Q1 FY26 earnings call

Call held 25 Jul 2025

Management summary

Suryoday Small Finance Bank reported strong Q1 FY26 growth in gross advances (20% YoY to ₹10,846 crore) and deposits (39% YoY to ₹11,312 crore), bolstered by retail and digital channels. While asset quality remains a focus with GNPA at 8.5% and NNPA at 5.6%, management anticipates a substantial reduction in NPA accretion by Q3 and aims for 5% GNPA and 3% NNPA by year-end, leveraging the CGFMU scheme for risk mitigation. The bank is guiding for an ROA of 1.5-1.6% and ROE of ~12% for the current year.

Highlights

  • Gross advances grew 20% YoY to ₹10,846 crore, driven by inclusive finance and mortgages on wheels.

  • Deposit base grew 39% YoY to ₹11,312 crore, with retail deposits now at 82% of total, up from 79% a year ago.

  • Inclusive finance current bucket collection efficiency improved to 98.4% in June '25 from 97.5% in April '25, with the last 6 months' portfolio at 99.5%.

  • Digital deposits reached ₹1,000 crore with a daily run rate of ₹3 crore, offering a substantially lower customer acquisition cost (35-50 bps).

  • Over 98% of the inclusive finance portfolio is covered under the CGFMU scheme, with ₹584 crore receivable.

Concerns

  • Current GNPA stood at 8.5% and NNPA at 5.6% as of June 2025.

  • Slippages in Q1 FY26 were ₹278 crore, with ₹240 crore from microfinance.

  • CASA ratio is 17.7%, below the target of reaching the 20% range.

  • The NBFC, MFI sector experienced increased asset quality pressures in FY25 due to borrower overleveraging and socio-political dynamics.

Key financials

  1. Gross Advances ₹10,846 Cr +20%YoY
  2. Deposit Base ₹11,312 Cr +39%YoY
  3. Retail Deposits Share 82%
  4. CASA Ratio 17.7%
  5. GNPA 8.5%
  6. NNPA 5.6%
  7. GNPA Amount ₹918 Cr
  8. NNPA Amount ₹593 Cr
  9. CGFMU Receivable ₹584 Cr
  10. Digital Deposits ₹1,000 Cr
  11. Slippages Q1 FY26 ₹278 Cr
  12. Slippages Q4 FY25 ₹308 Cr
  13. PSLC Income Q1 FY26 ₹30 Cr
  14. One-time Investment Gain Q1 FY26 ₹13 Cr
  15. Microfinance Slippages Q1 FY26 ₹240 Cr

What they filed

Q1 FY27: revenue up 25.7%, net profit up 114.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue507 488 471 495 520 +3%544 +11%602 +28%622 +26%
Net profit45 33 -34 35 30 −33%37 +12%50 +247%75 +114%
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.

Guidance & targets

CASA Ratio

  • CASA Ratio CASA Ratio · coming quarters · Medium confidence 20% range
    CASA is reasonably stable at 17.7% and we aim to reach back the 20% range in the coming quarters.

    — Baskar Babu R.

Asset Quality

  • NPA Accretion Asset Quality · Q3 · Medium confidence substantial reduction
    Q3 is where you would see a substantial reduction in the NPA accretion compared to Q1.

    — Baskar Babu R.

  • CGFMU Claim Amount Asset Quality · Q3 · High confidence ~₹300 crore
    We are expecting about 300-odd crore as the claim amount from our side in Q3.

    — Kanishka Chaudhary

  • Slippages Asset Quality · next quarter and thereafter · High confidence ₹50 crore to ₹70 crore
    So we would want that our slippages reduces anywhere between ₹50 crore to ₹70 crore in the next quarter and then the quarter thereafter.

    — Kanishka Chaudhary

  • GNPA Asset Quality · year-end · High confidence 5%
    Overall, I think we have guided for 5 and 3.

    — Baskar Babu R.

  • NNPA Asset Quality · year-end · High confidence 3%

    — Baskar Babu R.

  • NNPA minus CGFMU cover Asset Quality · ongoing · High confidence very close to 0%
    But what would be is that, by and large, we'll try to maintain the NNPA minus the CGFMU cover, very close to 0%.

    — Baskar Babu R.

Profitability

  • Credit Cost Profitability · this year · High confidence ~1.2%
    So for this particular year, we will look to have a credit cost of around 1.2 one quarter.

    — Kanishka Chaudhary

  • Credit Cost Profitability · steady-state · High confidence ~1%
    On a steady-state basis, we will be having credit costs just about near about 1% and given the kind of mix that we have in the businesses today.

    — Kanishka Chaudhary

  • NIM Profitability · ongoing · High confidence 7.5% to 8%
    We expect the NIMs to be in the region of 7.5% to 8% with the mix that we have.

    — Kanishka Chaudhary

  • ROA Profitability · current year · High confidence 1.5% to 1.6%
    Okay. Okay. And sir, for current year, we are guiding for 1.5% to 1.6% ROA and around 12% ROE.

    — Baskar Babu R.

  • ROE Profitability · current year · High confidence ~12%

    — Baskar Babu R.

Portfolio Mix

  • Secured/Unsecured Mix Portfolio Mix · ongoing · High confidence 55%/45%
    We shall continue to maintain this mix of 55%, 45% between secured and unsecured.

    — Kanishka Chaudhary

Deposits

  • Deposit Book Growth Deposits · ongoing · High confidence 40%
    So I have a question regarding the liability franchise. So I was going through our presentation. So we have a guidance for 40% growth in our deposit book.

    — Siddharth C.

What to watch in Q2 FY26

CASA Ratio Improvement

coming quarters
Current 17.7%
Target 20% range

Why it matters

Indicates strengthening deposit franchise and lower cost of funds, crucial for profitability.

CASA is reasonably stable at 17.7% and we aim to reach back the 20% range in the coming quarters.

Risks & concerns

  • Asset Quality Pressures in NBFC/MFI Sector

    medium

    Increased asset quality pressures in FY25 due to borrower overleveraging, socio-political dynamics, and operational challenges.

    Management acknowledged

  • Inclusive Finance Book Performance vs. Peers

    medium

    Analyst questioned why Suryoday's inclusive finance book was heavily impacted in both COVID and current stress cycles compared to peers.

    Analyst acknowledged

  • Customer Over-leveraging & Identity Issues

    medium

    Customers getting loans under different names or using different IDs (e.g., Aadhar vs. Voter ID) leading to over-leveraging and difficulty in tracking.

    Management acknowledged

  • Overall Market Slowdown in Disbursals

    low

    Overall market has slowed down in terms of disbursal, leading to muted portfolio growth across the industry.

    Management acknowledged

Q&A highlights

7 direct
Digital Deposits Customer Cohorts & CAC Direct
Currently, our digital sourcing on liabilities, is on account of our partnerships with the payment banks, Fino, Jio, Airtel, and these are our key partners. And on the digital fixed deposits, which are completely granular, we source through various platforms and the largest platform for us currently is Stable Money. We are currently accruing around 3 crore per day, predominantly on the retail FD side. And the CAC is substantially lower than the physical mode approximately around 35 to 50 basis points.

Provides insight into the bank's digital strategy, partnerships, and cost efficiency in customer acquisition for deposits.

Asked by Jay Chauhan

Secured Portfolio Stress & Performance Direct
So Shailesh, overall, we are significantly outperforming the market right now for 1-year cohort or a 2-year cohort on both CV and mortgages. And it's too early because this static pool stabilizes in 36 months and anywhere between 24 months to 36 months. So last year, anything sourced post-COVID, the portfolio is intact big and span. And we had some incidents in the past in MP in mortgage. Otherwise, we are the portfolio post that is completely intact.

Addresses analyst concerns about potential stress in secured assets, confirming the bank's outperformance and portfolio health post-COVID.

Asked by Shailesh Kanani

Unsecured Portfolio Slippages & Stabilization Direct
Shailesh, what we're really seeing, which is really kind of heartening is at the rate of accretion to the NPA is coming down quarter-on-quarter. So we are kind of seeing almost a trend going closer back to what it would have been around 6 quarters back. So hopefully, if this trend continues, then it's near back to normalcy in Q3 and probably in Q4. The reason probably from some of the early SMAs would have come down is that the current bucket collection efficiency has inched up closer to around 98.5%, 98.6% and fairly confident that the current run rate will cross 99% in the month of July.

Offers a positive outlook on asset quality improvement, indicating a potential peak in slippages and a return to normalcy for the unsecured portfolio by Q3-Q4.

Asked by Shailesh Kanani

Non-Interest Income & CGFMU Claim Impact Direct
So there are 2 parts to your question. So on the other income, this year, we made a little over 30 crore on PSLC. And we had a onetime gain from a sale of our investment portfolio in OMO amounting to 13-odd crore, right? So both of them look to be one-off for the time being. We do not expect significant money to be made in PSLC for sure in the next 2 quarters. To your question on how the claim will impact our P&L.? So what we see that all claims that we are likely to make in Q3 will be P&L neutral, it will help us reduce our headline GNPA numbers.

Clarifies the components of non-interest income and the P&L impact of CGFMU claims, indicating they will be P&L neutral while reducing headline GNPA.

Asked by Shailesh Kanani

NIM Trajectory & Portfolio Mix Direct
We expect the NIMs to be in the region of 7.5% to 8% with the mix that we have. We shall continue to maintain this mix of 55%, 45% between secured and unsecured.

Provides clear guidance on expected NIMs and the strategic portfolio mix, which are crucial for profitability.

Asked by Shailesh Kanani

Inclusive Finance Book Performance & Learnings Partial
Sir, while -- well, kind of this is something which has to be seen at a little longer basis. So I do agree that in COVID, it was a little higher basically because we are because of geographical concentration. But we're also very clear that this is not a customer segment where you fund it and you kind of go and collect somehow. So sometimes even on a personal basis, when you go and meet the customers, there has been a health crisis or there has been an economic crisis. Irrespective of whatever pre-analysis that you do, when they kind of get into that, it's not collected at any cost.

Addresses concerns about the bank's inclusive finance book being disproportionately impacted in stress cycles, highlighting past issues and current focus on customer engagement and collection.

Asked by Siddharth C.

Borrower Leverage & Market Disbursals Direct
So overall market has slowed down in terms of disbursal. So you can clearly see muted portfolio across. So players like us who are focusing on the graduating customers and on continue to play and continue to grow. So we have gone back to the more or less same disbursal numbers of Q1 FY25 as this quarter. And our individual loans are actually become now two third of our overall IF portfolio.

Provides context on the broader market environment for disbursals and the bank's strategy to focus on graduating customers and individual loans amidst a slowdown.

Asked by Ashlesh Sonje

Credit Bureau Checks for Borrowers Direct
From April 2023 onwards, it is mandatory to collect the co-applicant's KYC detail. So the entire industry collected. So we have collected we have got the bureau track of the husband or the earning members of the household. So we have a significant data as far as our existing customers are concerned.

Clarifies the bank's due diligence process for credit bureau checks, especially for co-applicants, which is critical for risk management.

Asked by Ashlesh Sonje

2 min read 6 chapters

Detailed narrative

Robust Growth in Advances and Deposits

Suryoday Small Finance Bank demonstrated strong performance in Q1 FY26, with gross advances increasing by 20% year-on-year to ₹10,846 crore. The deposit base also saw significant growth, expanding by 39% year-on-year to ₹11,312 crore. This growth was primarily fueled by the retail franchise and the bank's digital channels, with retail deposits now constituting 82% of the total, up from 79% a year earlier.

Asset Quality and Collection Efficiency Trends

As of June 2025, the bank reported a GNPA of 8.5% and an NNPA of 5.6%, translating to ₹918 crore and ₹593 crore respectively. However, there are positive trends in collection efficiency, with the inclusive finance current bucket collection efficiency improving from 97.5% in April '25 to 98.4% in June '25. Management anticipates a substantial reduction in NPA accretion by Q3, aiming for GNPA of 5% and NNPA of 3% by year-end.

Strategic Use of CGFMU for Risk Mitigation

A significant portion, over 98%, of the bank's inclusive finance portfolio is covered under the CGFMU scheme, providing a crucial layer of risk mitigation. The bank has ₹584 crore receivable under this scheme and expects to claim approximately ₹300 crore in Q3. These claims are projected to be P&L neutral and will contribute to reducing the headline GNPA numbers, strengthening the bank's balance sheet.

Digital Channel Driving Deposit Growth and Efficiency

The digital channel has emerged as a key growth driver for deposits, with digital deposits now exceeding ₹1,000 crore and maintaining a daily run rate of ₹3 crore. This channel primarily attracts retail fixed deposits and boasts a significantly lower customer acquisition cost (35-50 basis points) compared to traditional physical modes. This digital expansion supports the bank's mission of financial inclusion and enhances operational efficiency.

Profitability and Portfolio Mix Outlook

Suryoday Small Finance Bank has provided guidance for a Return on Assets (ROA) of 1.5% to 1.6% and a Return on Equity (ROE) of approximately 12% for the current financial year. The Net Interest Margin (NIM) is expected to stabilize in the range of 7.5% to 8%, with the bank committed to maintaining its strategic portfolio mix of 55% secured and 45% unsecured assets. Credit costs are projected at around 1.2% for the current year, with a long-term steady-state target of approximately 1%.

Addressing Industry Challenges and Future Strategy

Acknowledging the asset quality pressures faced by the NBFC and MFI sectors in FY25 due to borrower overleveraging, Suryoday has proactively implemented MFIN Guardrails 2.0. The bank is shifting its focus towards individual loans and graduating customers, with individual loans now constituting two-thirds of its overall inclusive finance portfolio. Management aims to reduce quarterly slippages to ₹50-₹70 crore in the next quarter and thereafter, ensuring a more resilient portfolio.

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