Summary
Fedbank Financial Services Limited - Q3 FY 2026 Earnings Call Summary Friday, January 16, 2026, 6:00 PM IST
Event Participants
Executives 6 C.V. Ganesh (CFO), Jagadeesh Rao (CBO, Gold Loans), K. Sureshkumar (CBO, Medium Ticket LAP), Lokesh Pareek (Head of IR), Parvez Mulla (MD & CEO), Shardul Kadam (CBO, Small Ticket LAP), Vikram Rathi (CRO)
Analysts 10 Chintan Shah (ICICI Securities), Digant Haria (GreenEdge Wealth), Meghna Luthra (InCred Equities), Nischint Chawathe (Kotak), Pavan (Edelweiss), Prolin Nandu (Edelweiss), Rahul Kumar (Vaikarya), Sandeep Joshi (Unifi Capital), Shubhranshu Mishra (PhillipCapital), Vedant Maheshwari (Intellivest Family Office)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total AUM | ₹17,500 crores | +17% YoY; +32% YoY growth when excluding the divested business loan (BL) segment. |
| Gold Loan AUM | ₹7,905 crores | +52% YoY; recorded highest ever quarterly net AUM growth of ₹1,174 crores. |
| Mortgage AUM | ₹9,084 crores | +20% YoY; split roughly 60-40 between Medium Ticket (MT) and Small Ticket (ST) LAP. |
| Disbursements | ₹8,606 crores | +96% YoY; driven by record gold loan originations of ₹7,853 crores in Q3. |
| Net Interest Income | ₹318.9 crores | +16.8% YoY; driven by AUM growth and moderating cost of funds. |
| Net Profit (PAT) | ₹87.9 crores | Sequential growth maintained; ROA expanded to 2.5% and ROE to 12.7%. |
| Cost of Borrowing | 7.87% | -32 bps QoQ; helped by external benchmark resets and shorter-tenor gold loan funding. |
| GNPA (Stage III) | 2.1% | +20 bps QoQ from 1.9%; attributed to forward flows in the “old vintage” ST LAP book. |
| Credit Cost | 0.9% | Held below the 1% guidance despite higher slippages due to improved recoveries. |
| Gold Tonnage | 11.2 Tons | +5.1% YoY; management continues to prioritize tonnage over price-led AUM growth. |
Geographic & Segment Commentary
- Gold Loans: This segment was the standout performer with 52% YoY growth, supported by 54 new branch openings in Q3. AUM per branch rose to ₹13.3 crores despite rapid expansion, with management targeting ₹20 crores per branch in the long term. Strategic focus remains on Western and Northern India to avoid the high competition in Southern markets.
- Small Ticket (ST) LAP: Currently in a “rebuilding” phase with ₹208 crores disbursed this quarter following the implementation of a new system-driven BRE. Stress is concentrated in specific “old vintage” cohorts (pre-FY24) in Tamil Nadu and Maharashtra, largely due to previous collection infrastructure gaps now being addressed.
- Medium Ticket (MT) LAP: Continues to perform consistently with ₹545 crores disbursed in Q3. Asset quality remains “pristine” in this segment, though management noted industry-wide yield pressure; Fedfina has maintained yields better than peers by avoiding aggressive price cuts.
Company-Specific & Strategic Commentary
- Twin-Engine Strategy: The company has successfully transitioned to a 99.4% secured lending profile (Gold and LAP), with the unsecured business loan book now reduced to just 0.6% of on-book assets.
- Operational Efficiency & Co-location: Fedfina co-located 63 ST LAP branches into gold branch premises this year to reduce the fixed cost base. Management expects the full impact of these savings to reflect in FY27 as leases expire and infrastructure stabilizes.
- Collection In-housing: Management has transitioned collection responsibilities from external agencies to an in-house verticalized framework. This move caused short-term volatility in GNPAs but is expected to provide better predictability and recovery rates by Q4 FY26.
- Treasury Management: Fixed-rate borrowings were increased from 11% to 29% of the mix to lock in spreads ahead of a declining interest rate cycle, while incremental borrowing costs dropped to 7.6%.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Credit Cost | 1% (+/- 10 bps) for FY26 | Management is confident in holding this range despite GNPA volatility through improved recovery legal processes. |
| Opex-to-Assets | Reduction in FY27 | FY26 is characterized as an “investment year” with flat cost-to-income; FY27 will see the benefits of branch co-location and technology. |
| Gold Tonnage | 10% - 12% CAGR | Target remains steady despite gold price volatility; growth to be driven by new customer acquisition and Western/Northern expansion. |
| Direct Assignment (DA) | Reducing reliance | Choice-based reduction to improve core interest income; migrating toward a co-lending model for capital allocation. |
Risks & Constraints
| Risk | Context |
|---|---|
| ST LAP Asset Quality | Sustained slippages from the pre-FY24 book in specific geographies (TN/MH) remain a drag; mitigation involves a new in-house recovery team and tighter BRE for new sourcing. |
| Yield Compression | Intense competition in MT LAP and the impact of rising gold prices on ticket sizes may pressure yields; management is counteracting this by shifting borrowing to the shorter end of the curve. |
| Labor Code Impact | A one-time impact of ₹3.9 crores was felt in Q3 due to retiral benefit adjustments; future impacts depend on industry-wide salary adjustment trends in the April wage cycle. |
Q&A Highlights
Gold Loan Seasonality & Growth
- Question: Why is the operating leverage not yet visible despite strong gold AUM growth? (Digant Haria)
- Answer: Gold loan incentives are recognized upfront in the month of origination, while revenue is back-ended over the loan’s life. Q3 was an exceptional disbursement quarter (₹7,853 Cr), meaning the margin benefit will flow in subsequent quarters (C.V. Ganesh).
Asset Quality Deep-Dive
- Question: Is the spike in GNPA to 2.1% a concern for the new book? (Prolin Nandu)
- Answer: No, there is a 100-150 bps difference in performance between the new book and the old vintage book. The current slippages were predicted and are being managed through in-house collection teams that are better at handling legal recoveries once an account hits NPA (Parvez Mulla).
Borrowing Strategy
- Question: Will you align borrowing tenors more closely with gold loan durations? (Shubhranshu Mishra)
- Answer: Yes, the increased gold mix allows us to borrow more at the shorter end of the yield curve, which aided the 32 bps decline in interest costs this quarter and supports future NIM expansion (C.V. Ganesh).
Regional Performance
- Question: Has the Tamil Nadu personnel/business issue been resolved? (Pavan)
- Answer: Business has picked up by 20-30%, but we are still cautious. We expect Tamil Nadu to return to “disbursal normalcy” by Q4 FY26 or Q1 FY27 (Parvez Mulla).
Key Takeaway
Fedbank Financial Services delivered a robust Q3 FY26, characterized by record gold loan disbursements of ₹7,853 crores and a 52% YoY growth in the gold AUM segment. The company has successfully executed its transition to a 99.4% secured lending profile, virtually eliminating the unsecured business loan book. While Gross Stage III assets rose to 2.1% due to legacy issues in the Small Ticket LAP portfolio, credit costs remained contained at 0.9%, meeting management’s guidance. Strategically, the firm is investing in branch co-location and in-house collections to drive operating leverage, which is projected to materialize in FY27. With ROA improving to 2.5% and a conscious shift away from DA income toward core interest income, Fedfina is positioning itself for a more predictable, high-margin growth trajectory. The company remains on track to maintain its 1% credit cost guidance for the full year while aggressively expanding its gold footprint in Western and Northern India.
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