Summary
Paisalo Digital Limited - Q3 FY2026 Earnings Call Summary Monday, February 9, 2026 12:00 PM
Event Participants
Executives 3 Gaurav Chaubey (Chief Risk Officer), Harish Singh (Executive Director and CFO), Santanu Agarwal (Deputy Managing Director)
Analysts 5 Abhishek Jaiswal (Independent Investor), Anurag Patil (Individual Investor), Deepak Rao (KNR Securities), Divyansh Thakur (Finterest Capital), Sandy Mehta (Evaluate Research)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Assets Under Management (AUM) | ₹5,508.2 crores | +16% YoY; driven by steady expansion in income generation and MSME segments. |
| Quarterly Disbursements | ₹1,057.4 crores | +7% YoY; lower sequential growth due to some disbursements rolling over to Q4. |
| 9M FY26 Disbursements | ₹2,918.0 crores | +21% YoY; reflects healthy underlying credit demand across distribution channels. |
| Total Income | ₹240.1 crores | +18% YoY; driven by AUM expansion and stable yields. |
| Net Interest Income (NII) | ₹145.3 crores | +19% YoY; supported by improved funding efficiency. |
| Profit After Tax (PAT) | ₹66.3 crores | +29% QoQ, +6% YoY; highest ever quarterly profit for the company. |
| Net Interest Margin (NIM) | 6.0% | Maintained target levels; management guides for 6% on a full-year basis. |
| Gross NPA | 0.83% | -27 bps YoY; remains well-contained below the internal 2% ceiling. |
| Net NPA | 0.66% | -18 bps YoY; reflects pristine asset quality and robust recovery mechanisms. |
| Collection Efficiency | 98.8% | High repayment discipline supported by AI-optimized multilingual engagement. |
| Cost of Borrowing | 10.3% | -92 bps YoY; significant reduction from 13% in FY21 due to diversified funding. |
| Capital Adequacy (CRAR) | 38.3% | Strong loss-absorption capacity; well above regulatory requirements. |
| Debt-to-Equity | 2.22x | Prudent leverage providing ample headroom for balance sheet scaling. |
Geographic & Segment Commentary
- Core Geographies: Delhi, Maharashtra, Haryana, Rajasthan, and UP currently account for nearly 90% of the portfolio. The company is actively diversifying, with “Other States” growing to 8.2% of the book as Paisalo aims to keep every state’s contribution below 20% over the next three years.
- MSME & Income Generation: Focus remains on small-ticket loans for medical equipment, solar equipment, and industrial machinery. New institutional partnerships with Eicher, Kirloskar, and Sterling & Wilson are expected to drive the next phase of product-led growth.
- Distribution Network: Total touchpoints reached 4,872, including 402 branches and 1,429 business correspondents. This zero-capex distribution model leverages partner locations as origination hubs to improve asset traceability.
Company-Specific & Strategic Commentary
- AI-First Transformation: Paisalo is embedding proprietary AI across the lending lifecycle, including a dynamic Business Rule Engine (BRE) that uses real-time Bureau and Account Aggregator data to determine eligibility.
- Digital Onboarding: An AI-enabled public customer app is slated for launch in Q3 FY27 to facilitate repeat borrowing and seamless digital engagement for new-to-Paisalo (NTP) customers.
- Operational Efficiency: Automated EMI reminders now handle 350,000 daily calls in multiple languages, significantly reducing manual collection costs.
- Inorganic Growth: Management is actively evaluating acquisitions that offer complementary capabilities or market entry into priority geographies, provided they meet value creation benchmarks.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AUM, Income, & PAT | 2x Growth (Next 3 Years) | Anchored in a 25% AUM CAGR target and historical 36% PAT CAGR; supported by product expansion. |
| Asset Quality | GNPA < 2% | Long-standing philosophy to maintain credit discipline; current levels are well below this threshold. |
| Net Interest Margin | ~6% for Full Year | Confident in sustaining margins despite macro interest rate fluctuations through lower borrowing costs. |
| SBI Co-lending | Implementation in Q1 FY27 | Delayed from Q4 FY26 due to additional RBI compliance requirements regarding mirror accounts and KYC integration. |
Risks & Constraints
| Risk | Context |
|---|---|
| Regulatory Compliance | Recent RBI guidelines on co-lending require complex tech integrations for 80:20 account structures and mirror reporting, delaying SBI MSME partnership. |
| Geographic Concentration | High reliance on five states (UP, Delhi, etc.) posing regional macro risks; mitigation involves expanding via Business Correspondents in southern and western India. |
| Operating Leverage | OpEx grew 49% YoY, outpacing NII growth due to heavy investments in technology and physical touchpoints; stabilization is expected only in the medium term. |
Q&A Highlights
Growth Strategy & Scaling
- Question: What levers beyond AI will sustain a 25% CAGR without compromising asset quality? (Divyansh Thakur)
- Answer: Growth will be driven by doubling the product suite (adding 5 new products) and geographical expansion. Historical performance shows a 36% PAT CAGR between FY20-25, and asset quality has stayed below 1% through cycles (Santanu Agarwal).
SBI Co-Lending Status
- Question: What is the status of the SBI MSME co-lending agreement? (Sandy Mehta/Abhishek Jaiswal)
- Answer: Both parties remain bullish, but start-up is moved to Q1 FY27 due to new RBI policies. Compliance requires separate loan accounts (80:20), mirror account reporting, and back-to-back KYC integration (Santanu Agarwal).
Borrowing Costs
- Question: How will you further reduce the cost of borrowing? (Anurag Patil)
- Answer: In Q3, ₹188 crores was raised at 8.5% through CPs and NCDs. The strategy involves leveraging the base of 2,000+ debenture holders and 1.5 lakh shareholders to diversify funding away from high-cost bank debt (Santanu Agarwal).
Geographic Concentration
- Question: Why hasn’t diversification increased despite more touchpoints? (Rahul Gupta)
- Answer: The company enters new states via Business Correspondents first (low/no-capex). As banking literacy and volumes grow, these transition to full branches. The limit is to bring all states under a 20% individual cap (Santanu Agarwal).
Key Takeaway
Paisalo Digital delivered a record performance in Q3 FY26, with PAT reaching ₹66.3 crores, a 29% sequential increase. While AUM grew 16% YoY to ₹5,508.2 crores, the company is aggressively investing in an “AI-first” transformation to double its AUM and PAT over the next three years. Strategic focus remains on low-capex distribution expansion through 4,872 touchpoints and the deployment of a proprietary dynamic Business Rule Engine to enhance underwriting. Despite a temporary delay in the SBI MSME co-lending rollout due to regulatory compliance, the company achieved a significant reduction in borrowing costs to 10.3%. Management maintains a cautious yet growth-oriented stance, prioritizing asset quality (GNPA at 0.83%) over rapid disbursement, while preparing for a major digital push with a new customer app in late 2026. Forward momentum depends on the successful integration of AI-led operating leverage to offset current high investment costs.
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