Summary
Suryoday Small Finance Bank Limited - Q3 FY26 Earnings Call Summary Friday, January 23, 2026 11:00 AM
Event Participants
Executives 4 Baskar Babu Ramachandran (MD & CEO), Hemant Shah (Executive Director), Kanishka Chaudhary (CFO), Himadri Das (Head of Investor Relations)
Analysts 8 Ambar (Siana Capital Management), Arvind (CapitaLand), Avnish Tiwari (Vaikarya Capital), Chinmay (Prescient Capital), Deepak Poddar (Sapphire Capital), Jaspree (VA Capital), Rahul Kumar (Vaikarya Fund), Shailesh (Centrum Broking)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Gross Advances | ₹11,885 crores | +24.3% YoY; driven by momentum in inclusive finance and mortgages. |
| Total Deposits | ₹12,865 crores | +32.5% YoY; retail deposits now constitute 87% of the total mix. |
| CASA Ratio | 21.2% | Consistent improvement in deposit granularity and franchise depth. |
| GNPA Ratio | 6.6% | Elevated due to lack of write-offs; management expects slippages <₹100 crores in Q4. |
| NNPA Absolute | ₹501 crores | ₹467 crores (93% of NNPA) is receivable under CGFMU cohorts. |
| Net Interest Income | ₹782 crores (9M) | 9M decline from ₹862 crores YoY; impacted by interest reversals on slippages. |
| PPOP | ₹277 crores (9M) | 9M decline from ₹343 crores YoY; reflects higher operating costs. |
| Cost of Funds | 7.7% | Flat YoY; management actively reducing TD/SA rates across buckets. |
| Cost-to-Income | 73.6% (9M) | Increased from 66.4% YoY; target to bring below 65% in FY27 as paying book grows. |
| Capital Adequacy (CRAR) | 21.9% | Well above 15% regulatory requirement; provides headroom for growth. |
Geographic & Segment Commentary
- Inclusive Finance (IF): Disbursements have stabilized at ~₹500 crores per month with collection efficiency in the current bucket reaching 99.4%. Individual loans (Vikas loans) now represent 72% of the IF book, reflecting a strategic shift away from the JLG model to improve portfolio granularity.
- Commercial Vehicles (CV): The portfolio grew 35% YoY to ₹1,609 crores. Despite historical stress in this segment, management reports clear signs of improvement in collection trends and asset quality.
- Mortgages & Micro-mortgages: Book expanded 39% YoY to ₹2,778 crores. Focus remains on micro-markets and cash-flow-based underwriting, though some temporary slippage was noted in the Karnataka micro-mortgage segment.
Company-Specific & Strategic Commentary
- CGFMU Protection: Approximately 99% of the inclusive finance portfolio is covered under the CGFMU scheme, with a ₹350-400 crore claim expected in Q1 FY27. This provides a structural hedge against credit losses, though it prevents immediate write-offs of bad debt.
- Credit on UPI: Launched in partnership with Paytm, acquiring ~1.5 lakh customers monthly with over 2.2 lakh active users currently. Management views this as a high-scalability acquisition tool for mass-affluent retail customers.
- Digital Accretion: Digitally sourced deposits now contribute nearly 30% of incremental deposit accretion, significantly lowering acquisition costs compared to physical branches.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Slippages | <₹100 crores (Q4 FY26) | Reduction expected as MFI current bucket efficiency hits 99.5%. |
| Cost-to-Income | <65% (FY27) | Expected to normalize as the non-paying book is replaced by interest-earning assets. |
| ROA / ROE | 1.1% / 10% (Q4 FY26) | Target exit run-rate for the current fiscal based on stabilizing credit costs. |
| Credit Cost | ~1.0% (Steady State) | Target for the normalized portfolio mix across MFI and Retail assets. |
Risks & Constraints
| Risk | Context |
|---|---|
| Asset Quality Stickiness | Elevated GNPA (6.6%) persists because the bank cannot write off assets until CGFMU claims are settled, which creates a timing lag in balance sheet cleaning. |
| Competitive Margin Pressure | Repricing of individual loans from 28% to 26% yields and a rising share of lower-yield retail assets may compress NIMs, currently guided at 7.5%-8.0%. |
| Management Credibility | Analysts noted a lag between strategic shifts (JLG to Individual) and financial outcomes, with multiple quarters of “ordinary” results despite positive commentary. |
Q&A Highlights
Asset Quality & CGFMU
- Question: Why has Gross NPA increased while peers show declines? (Deepak Poddar)
- Answer: Unlike peers, the Bank does not perform Q-o-Q write-offs. Write-offs are coterminous with CGFMU claim receipts to ensure eligibility, keeping NPAs on the books longer (Kanishka Chaudhary).
- Question: What is the status of the next CGFMU claim? (Arvind)
- Answer: A claim of ₹350-400 crores is anticipated in Q1 FY27, which will significantly reduce the NPA pool (Kanishka Chaudhary).
Operational Efficiency
- Question: When will the 73.6% Cost-to-Income ratio improve? (Deepak Poddar)
- Answer: The first milestone is sub-65% in FY27. High CTI is currently driven by carrying ₹700-800 crores of non-paying assets (Kanishka Chaudhary).
Retail Strategy & UPI
- Question: How is the Paytm UPI partnership scaling? (Shailesh)
- Answer: Customer onboarding is growing exponentially at ~1.5 lakh/month. While the AUM is currently small (₹30 crores), active customers are expected to reach 10 lakhs by March (Baskar Babu).
Capital Raising
- Question: Why seek a fundraise (QIP) below book value? (Vatsal)
- Answer: The resolution is purely enabling to maintain a >20% CRAR. There is no immediate intent to dilute at current prices (Baskar Babu).
Key Takeaway
Suryoday SFB reported a transitional Q3 FY26, characterized by robust balance sheet growth (Advances +24.3%, Deposits +32.5%) but continued pressure on profitability due to high operating costs and asset quality normalization. The Bank is undergoing a structural shift, moving 72% of its inclusive finance book to individual loans and scaling digital channels which now contribute 30% of new deposits. While the GNPA of 6.6% appears elevated, management emphasized that 93% of the NNPA is covered by CGFMU receivables, with a major claim payout expected in Q1 FY27. For the immediate future, the Bank is focused on stabilizing credit costs to 1% and achieving a Q4 exit ROA of 1.1%. The successful integration of “Credit on UPI” and the transition toward a granular retail franchise are intended to drive healthier, more balanced growth through FY27.
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