Summary
India Shelter Finance Corporation Limited - Q3 FY26 Earnings Call Summary Monday, February 09, 2026, 11:00 AM
Event Participants
Executives 3 Ashish Gupta (CFO), Rahul Rajagopalan (Head, Investor Relations), Rupinder Singh (MD & CEO)
Analysts 8 Adityapal Singh Jaggi (MSA Capital Partners), Aman Soni (Nvest Analytics), Bunty Chawla (ASK), Kunal Shah (Citigroup), Lalitabh Shrivastawa (ISEC PMS), Mayank Mistry (Antique Stock Broking), Meghna Luthra (InCred Equities), Sonal Gandhi (Asian Markets Securities), Varun Palacharla (Kotak Securities)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Gross Managed Assets (AUM) | ₹10,365 crores | +31% YoY, +7% QoQ; growth remained within guided range despite softer disbursements. |
| Disbursements | ₹977 crores | +11% YoY; growth was muted as the company prioritized monitoring asset quality trends. |
| GNPA (Stage 3) | 1.5% | +30 bps QoQ; increase driven by intentional legal action for resolution in the 60-90 DPD buckets. |
| NNPA (Net Stage 3) | 1.2% | +30 bps QoQ; reflects the rise in gross slippages during the quarter. |
| Provision Coverage Ratio (PCR) | 25% | Stable YoY; management overlay remains significant compared to actual LGD of 11-12%. |
| Net Interest Income (NII) | ₹178 crores (approx.) | +31% YoY; driven by AUM growth and sustained spreads above 6%. |
| Yield on Portfolio | 14.9% | Stable YoY; disbursement yields for Q3 were slightly lower at 14.6%. |
| Cost of Funds (Bucket) | 8.3% | -50 bps YoY, -20 bps QoQ; marginal cost of funds stood lower at 8.1%. |
| Spreads | 6.6% | Consistently maintained above the 6% medium-term guidance despite rate cuts. |
| Opex to Managed Assets | 4.0% | -20 bps YoY (ex-labor code impact); driven by better productivity and digital sourcing. |
| Profit After Tax (PAT) | ₹128 crores | +33% YoY, +5% QoQ (ex-labor code impact). |
| ROA / ROE | 5.8% / 17.1% | ROA +30 bps YoY; ROE +200 bps YoY as net worth crossed ₹3,000 crores. |
Geographic & Segment Commentary
- Home Loans (HL): Represents approximately 60% of the portfolio. Management noted that NPA behavior in HL is nearly identical to LAP, with LTVs maintained at a conservative 55-57%.
- Loan Against Property (LAP): Comprises 40% of the mix. LAP offers approximately 200 bps higher yield than HL, with lower LTVs in the range of 47-48% to mitigate risk.
- Geographies: Presence spans 15 states. While most regions saw a slight “inch up” in delinquencies, Madhya Pradesh (MP) showed relative stability and a 10 bps improvement in December compared to previous highs.
Company-Specific & Strategic Commentary
- Digital Sourcing: New digital channel currently accounts for 4-5% of disbursements. Management aims to scale this to 10-12% in the medium term to drive down opex and improve lead quality.
- Asset Quality Resolution: Management intentionally allowed certain accounts to slip into Stage 3 to trigger SARFAESI and legal actions. November 2025 marked the peak for delinquencies, with “green shoots” visible in December and January.
- PMAY 2.0: Over 2,000 customers have already received subsidies under the new scheme. Management expects traction to pick up as technical processes at MoHUA streamline.
- Credit Rating: With strong financial performance, the company plans to approach rating agencies for an upgrade post-FY26 results, which could further reduce cost of funds by 20 bps.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AUM Growth | 30% - 31% (FY26) | Target to reach ₹30,000 crores AUM by 2030 remains intact. |
| GNPA (Stage 3) | 1.2% - 1.3% (Q4 FY26) | Expect improvement from 1.5% as legal actions and improved collections take effect. |
| Credit Cost | 40 - 50 bps (FY26/27) | Sustained guidance based on historical loss trends and current PCR. |
| Branch Expansion | 40 - 45 branches/year | 35 branches already opened in FY26; focused on deepening presence in existing 15 states. |
| Spreads | >6.0% (Medium term) | Intent to pass on rate cut benefits to new customers while protecting 6% threshold. |
Risks & Constraints
| Risk | Context |
|---|---|
| Asset Quality in Small Ticket Sizes | Loans under ₹5 lakhs are showing higher delinquency compared to the average ticket size of ₹10-15 lakhs. Management is tightening Business Rule Engines (BRE) and scorecards for this cohort. |
| Attrition | Branch-level attrition is high at approximately 35%, particularly in newer branches. Company is focusing on “non-regrettable” attrition and training to stabilize field staff. |
| Microfinance Overlap | Approximately 4-5% of the book has exposure to microfinance customers. The company is proactively monitoring this segment given the broader stress in the MFI sector. |
Q&A Highlights
Asset Quality & November Peak
- Question: Is there a specific pocket of stress causing the rise in Stage 3? (Varun Palacharla)
- Answer: No specific geography is “burnt out.” Management took a “harsh call” to let accounts move to Stage 3 to enforce SARFAESI. November was the peak, and January trends show improvement (Rupinder Singh).
Yields and Spreads
- Question: Why is interest income growth slower than AUM growth? (Varun Palacharla)
- Answer: Disbursement yields fell to 14.6% as rate cuts were passed to new customers. However, marginal cost of funds is at 8.1%, so incremental spreads remain strong at 6.5% (Ashish Gupta).
Collections Strategy
- Question: Have you added staff to handle the delinquency surge? (Kunal Shah)
- Answer: Approximately 200+ additional staff were added, primarily in the collections department, to be preemptive on field-level recoveries (Rupinder Singh).
Future Growth & PMAY
- Question: Is the 30% AUM growth target realistic given a muted Q2/Q3? (Bunty Chawla)
- Answer: December and January have seen a strong recovery in logins and disbursements. Combined with PMAY 2.0 traction, management is confident in hitting the 29-31% range for the full year (Rupinder Singh).
Key Takeaway
India Shelter delivered a resilient Q3 FY26 with 31% YoY AUM growth and a 33% increase in PAT, crossing the ₹3,000 crore net worth milestone. While Gross Stage 3 assets rose to 1.5%, management clarified this was a tactical move to initiate legal recoveries on sticky accounts, asserting that delinquencies peaked in November 2025. The company successfully lowered its cost of funds to 8.3% and maintained healthy spreads of 6.6%, well above the 6% guidance. Strategic shifts toward digital sourcing (now 5% of leads) and a focus on PMAY 2.0 (2,000+ subsidies) are expected to drive productivity and volume. Management remains committed to a 30% AUM growth trajectory with a target of ₹30,000 crores by 2030, while expecting Stage 3 assets to normalize toward 1.2-1.3% by the end of Q4 FY26.
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