Fedbank Financial Services · risk themes across the available quarters.
Bear-case history
Gold prices declined 15% between January 31 and June 30, 2026. Management claims conservative lending on 30-day average or spot (whichever lower) insulates from risk, but LTV increased from 61% to 68% due to price decline, potentially affecting collateral coverage.
Stage 2 increased from 2.2% to 2.7% entirely due to RBI-mandated change where LTV on bullet loans calculated on total amount due (principal + interest). Customer repayment behavior adjustment will take time; reported overdue levels expected to remain elevated. Management termed this 'new normal'.
Analyst raised concern about competitive intensity in LAP segment causing yield pressure. Management acknowledged substantial yield drop in competition but said Fedfina has not joined the race, instead maximizing yield at the cost of disbursement growth. This could impact volume targets.
Co-lending business disruption due to regulatory changes at gold loan partners resulted in larger portion booked on balance sheet, increasing leverage from 4.6 to 4.89. Management expects normalization in 'next few months' but timeline is vague. This increases capital consumption.
Gross Stage 3 rose to 2.1% due to continued slippages from old ST LAP book; management expects stabilization by Q4.
Opex rose 21% YoY due to new branch staffing, higher incentives, and a one-time labor code impact of ₹3.9 crore.
Gold loan yields declined from 19.1% to 18.3% due to competitive pressure and mix shift from high disbursals.
ST LAP disbursals in Tamil Nadu have only recovered 20-30%; full normalization expected by Q4 FY26 or Q1 FY27.