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What the record says.
IndoStar reported a net loss of ₹424 crore in Q4 FY26, driven by a ₹326 crore additional provision on security receipts and a ₹49 crore management overlay for West Asia risks. However, underlying business momentum is strong: disbursements grew 21% YoY to ₹1,366 crore, with vehicle finance AUM crossing ₹7,500 crore. The microlab segment saw disbursements surge 73% QoQ to ₹52 crore. Management guided for 35% CAGR in disbursements over three years, targeting ₹450-500 crore PAT by FY29, supported by portfolio quality improvements (non-starter rate down 68% to 1.05%) and cost of funds declining 60bps YoY. Key risk: elevated credit costs from legacy book may persist longer than expected.
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Guidance to track
- Management targets 35% compound annual growth rate in disbursements through FY29, supported by portfolio quality improvements and capacity expansion.
- Profit after tax target of ₹450-500 crore by FY29, driven by growth, operating leverage, and cost discipline.
- Normalized credit cost expected to stabilize between 2% and 2.5% as new underwriting book becomes dominant.
- Planned addition of about 100 branches over the next three years to support growth.
Risks flagged
- Despite ₹326 crore additional provision, net carrying value of ₹589 crore remains; realization may be gradual and subject to project delays.
- Management created a ₹49 crore overlay for potential stress from elevated fuel prices; impact on borrower repayment capacity is uncertain.
- Analyst noted high slippages from older vintages; management expects improvement as new book reaches 75% by September, but near-term credit costs could remain elevated.
- Analyst questioned whether PAT target implies low ROE (~12%); management cited growth focus and investment phase, but ROE may lag peers in near term.
Key quotes
- We took a deliberate pivot transitioning towards a sustainable high growth portfolio quality focused and highly profitable growth framework.
- Our non-starter percentage defined as zero plus DPD cases disbursed in last 6 months is down massively by 68% from 3.29% when we started tightening credit filter to just 1.05% as of March 26.
- We are fully primed for acceleration and takeoff. We are confident of achieving cruising altitude in the coming year and delivering highly profitable growth and compounding stakeholder value.
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