ESAF Small Finance Bank Limited (NSE: ESAFSFB) Q4 2026 Earnings Call dated May. 04, 2026
Corporate Participants:
K. Paul Thomas — Managing Director & Chief Executive Officer
George Kalaparambil John — Executive Director
Gireesh C P — Chief Financial Officer
Amit Mehendale — Unidentified Participant
Analysts:
Deepak Podar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to ISAF Small Finance Bank Limited Q4FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchtone. Please note that this conference is being recorded. I now hand the conference over to Dr. K. Paul Thomas, MD and CEO of ISAF Small Finance Bank.
Thank you. And over to you sir.
K. Paul Thomas — Managing Director & Chief Executive Officer
Thank you. Thank you. Good afternoon and welcome to ESAF Small Finance Bank’s Q4 and FY26 earnings call. On behalf of the Board and the management team, I thank you for joining us today and for your continued interest in ISA Small Finance Bank. Joining me today are my colleagues Mr. George Kajohn, Executive Director and Mr. Girish, CP, EVP and CFO at ESAF Small Finance Bank. Our strategic focus remains on building a granular, diversified and increasingly secured lending portfolio which we believe is essential for improving asset quality, earnings stability and long term scalability.
At the same time, our commitment to financial inclusion and serving the underserved segments continues to be a core differentiator of our franchise. As outlined in our previous call, our mark strategy, MSME Agriculture, Retail and Gold Loans is central to this transition. This approach is enabling us to diversify risk, improve portfolio quality and reduce dependence on unsecured segments. During the year, these segments have delivered healthy and broad based growth aligned with our strategic priorities.
Our focus on secured lending, disciplined underwriting and calibrated risk management is now beginning to reflect in Our performance in Q4FY26 we have seen sequential improvement across key financial parameters including asset quality and profitability metrics indicating early outcomes of the strategic shift underway. On the liability and customer side, we continue to deepen our presence across rural, semi urban and urban markets. During the year we crossed a milestone of 10 million customers with a strong representation of women borrowers.
We see this as a structural strength of our model contributing to both portfolio resilience and long term franchise value. From a sector perspective, the microfinance industry is showing stable signs of stabilization after a period of stress collection. Efficiencies have improved and operating conditions are gradually normalizing supported by better borrower discipline better credit underwriting and easing delinquencies. While external factors including geopolitical developments remain a watch point, we believe the sector is now on a more stable trajectory.
Looking ahead, our priorities remain clearly defined increasing the share of secured assets, improving asset quality, strengthening profitability, driving operating efficiency and improve customer experience. This will be supported by continued investments in technology, distribution and analytics led decision making. With that, I now invite our Deputy Director Mr. George Kajohn to take you through the performance highlights.
George Kalaparambil John — Executive Director
Thank you Porshav and good afternoon everyone. We continue to build on the momentum from the previous quarter with a clear focus on sustainable growth and financial disciplines. As a result, we have seen sequential improvement across key operating and financial metrics including profitability, asset quality, moderation, slippages, improved operational efficiency and strengthening return ratios. As of 31st March 2026 our bank total business stood at 48,276 crores registering a 50 percentage year on year growth compared to 4,055 crores last year.
Gross advances grew by 19 percentage while deposits increased by 11 percentage reflecting balanced growth across both sides of the balance sheet. On the other side, future deposits remain strong at 22% of total deposits compared to 93% last year. Further, 88% of non deposits carries a non prepayment clause providing stability to our funding basis. Our LCR the liquidity cover ratio stood at 143.35 percentage as of 31st March 26th indicating a comfortable liquidity position. Disbursement during Q4FY26 grew by 88 percentage YoY and remained broadly stable sequentially for the full year.
We record our highest average disbursement of 42,530 crores reflecting 103% growth of FY25. This growth was broad based with a marked portfolio contained to be the key driver, growing by 1 percentage during the year. Importantly, 80% of all deposits were disbursements work towards secured assets in line with our strategic priorities. On the advanced side, our microfinance book remains stable at 8746 crores as of March 26. The secured loan mix improved to 61% compared to 63% last year driven by the continuous scaling of Mark’s portfolio.
Overall, MARG Advances grew by 4% profit year on year with Gold Loan and Morbi loans which delivered growth of over 50%. The ongoing portfolio transition is strengthening asset quality, reducing earnings volatility and supporting sustainable growth. Given the lower NPI profile of the segment, we have also seen a decline in fresh lippage on sequential basis supported by improved costing efficiencies and clarity and credit footing. Notably, there was no ARC sales for techno write off during this quarter.
Reflecting underlying portfolio stability, we remain on track to achieve our stated positive 70% secured assets by March 2007. Our distribution network continues to be a key strength 800 for banking outlets, 720 ITMs, 1044 customer service centers and 32 institutional business correspondents across 24 states and two union territories enabling deep customer reach and engagement. Under microbrence portfolio we’re adopting a calibrated and risk risk cover approach aligns with improving operating environment.
Key initiatives include strengthening field engagement through Sangram and group process enhancements, targeted source of higher quality customer structured graduation to easier lending and focused restoration of delegate accounts. With improving collection trends and discipline and underwriting, we believe that portfolio is now on a stable footing. On technology front itself, 2.0 Stanlos remains a key strategic initiative. This digital transformation program is aimed at laying a strong and agile foundation on our core plant, technology, infrastructure and business applications.
We are making steady progress on the field and we expect immunization to be completed well before this calendar year, that is before Q3 FY27. It will bring in the much needed agility to quickly adapt to the emerging market’s needs, enhance operational efficiency, better data governance, improved risk management and enriched customer experience and service. Our progress in digital transformation has been recognized through multiple industry awards including the Digital Transformation Excellence Award at the Hitachi Won, the Exchange Program and the Best Digital Trans Inclusion Award from the Indian Bank Association.
Overall, the improvement in performance during the second half of the year has been driven by tighter underwriting, calibrated growth, improved collections, cost discipline and a better portfolio mix. We remain focused on sustaining this momentum through disciplined execution of strategic priorities in the coming year. With that, I now invite our UAP and CFO MrS.CP take you to the detailed financial performance.
Gireesh C P — Chief Financial Officer
Thank you sir. Good afternoon everyone and thank you for joining us today. Let me take you through the key financial highlights of Q4FY26. As of 31 March 2026, total deposit stood at 25,850 crores, registering a BoI growth of 11 percentage over 23,270 crores. With a credit deposit ratio of 83.5%. Retail deposits increased to 23,074 crore, growing 9% YoY and now constitute 92% of the total deposits reflecting a stable and granular funding base. CASA balances grew to 6181 crore up by 7 percentage by your wife.
With a CASA ratio of 23.9%, we expect CASA traction to gradually improve supported by continued focus on customer acquisition, service quality and branch led growth. Disbursements for the quarter stood at 12,926 crores reflecting a strong 88% YoY growth. Secured lending constituted 78% of the disbursements marking the sixth consecutive quarter with overall 75% share. In line with our strategy of improving portfolio quality, gross advances increased to 22,426 crores from 18,779 crore a year ago up 19% YoY.
The secured portfolio, largely driven by mark segments grew 47% YoY while the microfinance portfolio remains stable in absolute terms with a share reducing from 39% from 47% last year. The net interest income for the quarter was 518 crores compared to 432 crores in the previous quarter. Net interest margin improved to 7.3% from 6.6% supported by lower cost of funds and reduction in fresh flipped pages. Pre provisioning. Operating Profit stood at 241 crores up 166% on yoy basis driven by business growth and higher fee income.
Other income grew by 39% YoY during the quarter. Profit after tax for Q4FY26 stood at 24 crores compared to 7 crores in Q3. ROA and ROE improved to 0.1% and 1.3% respectively for the quarter. These are known annualized numbers on asset quality. GNPA declined to 5.4% from 6.9% and net NPA to 1.8% from 3% on a YoY basis. Slippages reduced significantly to 106 crores compared to 427 crores in the last year fourth quarter. This improvement reflects the the shift in portfolio mix, better collection efficiency and disciplined undertaking along with contribution from NPA resolution.
Our slippage ratio on gross basis reduced from 10.47% for FY25 to 6.47% on FY26. If you take for the last quarter it is 0.54 percentage on a non annualized basis for Q4 FY26. It also shown improvement on quarterly basis. Credit cost came down from 6.72% in FY27 FY25 to 4.74% in FY26. FY26 was effectively at year of two halves. While the first half was impacted by a challenging operating environment, the second half saw a clear improvement in Performance driven by portfolio rebalancing towards sector better asset quality, improved operating efficiency and cost discipline.
With a stabilizing external environment and continued execution of our strategic priorities, we expect further improvement in asset quality, margin and return ratios while maintaining a disciplined and sustainable growth trajectory. Thank you. And the floor is open for question and answers.
Questions and Answers:
Operator
Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask questions may please press Star and one on their touchstone pole. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assemble. You may please press Star and one to ask questions. The first question is from the line of Deepak Podar from Sapphire Capital.
Please go ahead.
Deepak Podar
Hello, I’m audible sir.
Amit Mehendale
Yes.
Deepak Podar
Okay. Thank you very much for this opportunity. So just wanted to understand first up now given the portfolio mix is more towards secured, currently it is 60% and we are targeting 80%. So. So what sort of normalized credit cost we are expecting with such kind of portfolio? And by when
Gireesh C P
A small correction on the unsecured book, we are given a, you know, gliding path up to 30 percentage,
Deepak Podar
Not 20%, 30%
Gireesh C P
We are planning to. And the credit cost going forward. If you see the credit cost for the current quarter alone it is 1.08
Deepak Podar
And
Gireesh C P
This includes, this has some backlog of provisioning on the stock of NPA. So steady state basis, you know, a 2 percentage credit cost is an expected kind of stuff going forward.
Deepak Podar
And then by when we can achieve that
Gireesh C P
This year also there will be some backlog on provisioning. So from FY28 you can expect.
Deepak Podar
Okay, okay, understood. So some, some background provisioning will continue in FY27. So a 2% kind of a credit cost steady state we can see by FY28.
Gireesh C P
Yes.
Deepak Podar
Okay. And sir, anything on the growth and ROA thing on FY27? I mean any outlook you want to share, that would be very helpful.
Gireesh C P
It is a futuristic statement and you know I am unable to give you at this moment,
Deepak Podar
But
Gireesh C P
One thing which I can tell is that the growth is back and the asset quality problems are almost over and going forward. We will be honest today kind of growth, that is what is expected.
Deepak Podar
Okay, so what you’re trying to say, growth is back, asset quality problem is over. So ideally we will see a much better performance than what we would have been seeing. Right?
K. Paul Thomas
Yeah. Also we have built over a period of last nine years we built a great franchise spread across 26 states. So we have 804 branches. We have 32 institutional business correspondent partners. So they are operating thousand plus customer service centers. So last two years because of the asset quality issues and challenges we were actually not able to fully leverage on the network we built. So going forward we are seeing a great opportunity to leverage on the network we built and mostly these in the rural and semi urban areas of India.
So the products we have developed are relevant for these markets and that’s where you will, I hope you got my point that how we are positioning ourselves
Deepak Podar
And given this portfolio mix more towards secured. Now your credit cost you mentioned steady state would be 2%. So what sort of steady state ROA. I mean with this current the mark focus that we have
Gireesh C P
We are planning to have an ROA of 2 percentage
Deepak Podar
And that too, I mean we will target to achieve by FY28.
K. Paul Thomas
Yeah.
Deepak Podar
Okay, okay, okay.
K. Paul Thomas
Seeing the traction in another couple of extra 2/4 you will see that the trend you will see.
Deepak Podar
Okay, next two quarters may be attraction we might expect in ROA front as well. Yes.
K. Paul Thomas
Yeah. Okay.
Deepak Podar
I think, yeah, that’s pretty much. That’s very helpful sir. I mean wish you all the best. Thank you.
K. Paul Thomas
Thank you. Thank you Deepak. Thank you. Thank you so much.
Operator
Thank you. A reminder to all the participants that you may please press star and one to ask questions. The next question is from the line of Amit Mehendale from Robocapital. Please go ahead.
Amit Mehendale
Thank you. So my first question is, you know on the loan book growth, I think this year we’ve grown by about 19% or odd. So going forward, I mean one can expect maybe 18, 20, 22% because they’re coming out of a lean period like years have been very challenging. And now once the credit cost issues are behind us we should be able to you know see a healthy growth. Right. Maybe 20% or I mean what do you think? I mean you may not give me a number but broadly I think the trajectory should continue.
Gireesh C P
Yeah. This year you know we have done some IBPC also is there. We have done offloaded books to the extent of 650crores which is not there in the growth numbers. And you know on a steady state basis 20 to 25 percentage is the growth which we are looking.
Amit Mehendale
Great, thanks. Any guidance on cost income ratio going forward?
Gireesh C P
Cost to income ratio somewhere around 65 plus or minus 2 percentage is the you know gradients which we are, we would like to give.
Amit Mehendale
Great. And my last question is on nii, now that our secured book is, you know, growing faster than the unsecured book and will have a larger proportion in the loan book, will NII grow in tandem with the loan book growth? Like suppose, you know, the loan book growth, let’s say 20%. Do you think NI will. NI should trail the loan book growth? Right?
Gireesh C P
Yeah. NII, you know, almost this on a steady state basis it has reached. So somewhere around 7 percentage, plus or minus half percentage will be the NAI going forward.
Amit Mehendale
Okay, great. That’s it from my end. Thank you very much. Thank
K. Paul Thomas
You.
Amit Mehendale
Thank you, Amit.
K. Paul Thomas
Thank you.
Operator
Thank you. Participants who wishes to ask questions may please press Star and one. Now. You may press Star and one to ask questions. Anyone who wishes to ask questions may please press Star and one on their touchstone form.
K. Paul Thomas
I think if there is no other questions, as
Operator
There are no. Sure, sir. As there are no further questions, I now hand the conference over to the management for closing comments. Thank you. And over to you, sir.
K. Paul Thomas
Thank you. Thank you. So thank you so much for participating in the call. So we believe we have taken the right strategic steps and hopefully supported by a positive macro environment so we can expect to see continued growth in the coming years. So I would like to thank all the participants, investors and analysts for taking the time out for this conference call today. In case you have any follow up questions or inquiries, you can always reach out to our investor relations team. Thank you very much.
George Kalaparambil John
Thank you. Thank you all.
Operator
Thank you, members of the management. Thank you, sir. Ladies and gentlemen, on behalf of ESAF Small Finance bank limited that concludes this conference, we thank you for joining us and you may now disconnect your lines.