Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Poonawalla Fincorp Ltd (NSE: POONAWALLA) Q3 2026 Earnings Call dated Jan. 16, 2026
Corporate Participants:
Shabnam Zaman — Company Secretary
Arvind Kapil — Managing Director and Chief Executive Officer
Vikas Pandey — Chief Business Officer, Consumer Business
Veer Agavan Iyer — Chief Business Officer, Commercial Business
Harsh Kumar — Chief Human Resources Officer and Head Artificial Intelligence
Sunil Samdani — Executive Director
Shriram Viswanathan Iyer — Chief Credit and Analytics Officer
Analysts:
Chintan Shah — Analyst
Abhijit Tibrewal — Analyst
Nischint Chawathe — Analyst
Kaitav Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to The Poonawala Fincorp Limited Q3FY 2526 earnings conference call. We have with us today on the call Mr. Arvind Kapil, Managing Director and Chief Executive Officer Mr. Sunil Samadhini, Executive Director Mr. Shrira Meyer, Chief Credit and Analytics Officer Mr. Vikas Pandey, Chief Business Officer, Consumer Business Mr. V. Raghavan Iyer, Chief Business Officer, Commercial Business Mr. Harish Kumar, Chief Human Resources Officer and Head Artificial Intelligence and other Senior Management officials.
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 phone. Please note that this conference is being recorded now. I hand over the call over to Shabnam Zaman, company secretary of Poonala Fincorp Ltd. Thank you. And over to you ma’. Am.
Shabnam Zaman — Company Secretary
Thank you. In line with good corporate governance practices. Please note this presentation may contain forward looking statements regarding the company’s future business prospects, strategies, estimates and profitability. But it is important to note that these statements are based on certain expectations, assumptions, anticipated developments and is subject to various risks and uncertainties. The actual results may differ significantly from what is stated in these forward looking statements. Risk and uncertainties related to these statements include fluctuations in earnings, our ability to manage growth, competition, economic condition in India and abroad, changes in law, rules and regulations relating to any aspects of the company’s business operations, general economic market and business conditions, attracting and retaining skilled professionals as well as government policies and actions.
Now I would like to hand over to Mr. Arvind Kapil Managing Director and Chief Executive Officer of the company.
Arvind Kapil — Managing Director and Chief Executive Officer
Thanks Shamand. Thank you. A very good evening to all of you. I wish all of you and your loved ones are very happy New Year. Let me open with industry and economic perspective from our side and the ways we are shaping our organization amid the current sector shifts. India’s real GDP grew at 8.2% in quarter two financial year 2526 up from 7.8% in quarter one EPI. Inflation progressively softened to 1.33% in December 25 from 4.26 in January. High frequency indicators signal ongoing economic momentum with inflation below the lower tolerance band following unemployment and improved exports.
Financial conditions in our assessment remain supportive with robust credit to commerce while demand holds steady on the strong consumption. Let me start with the performance update. I’d like to give a quick Update on the quarter 3 financial year 26 results. Our AUM as all of you are well aware is growing at around 77.6% year on year, 13.3% quarter on quarter standing at around 55,017 crores as of 2-31-25. Total disbursements in quarter three financial year 26 grew by 84% year on year and 6.5% quarter quarter.
Our new product disbursements has reached a monthly run rate of approximately 950 crores in the month of December. New products delivered at 25% quarter on quarter disbursement growth demonstrating the tangible momentum and market pull which our new products are generating at a grassroots level. To give you guys a feel, yes, the new product contribution to disbursements in quarter three financial year ASIC stands at 20% as compared to a 17% in comparison to the previous quarter. Our on book secured mix stands at around 56%.
Net interest margin including fee and other income stands at around 8.62% in quarter three financial year 26 versus an 8.4% in quarter two financial year 26. So it’s increased by around 22 basis points from quarter two to quarter three. Our GNPA for quarter three financial year 26 stands now at 1.51% versus a 1.59% in quarter two financial year 26. It’s a drop of another eight basis points here. Our stage one assets, which I think is an important indicator for any finance company, rose to 97.4% for quarter three financial year 26 as compared to 97.1% in quarter two financial year 26.
I think this is important from our efficiency improvement point of view, reflecting stronger asset quality and stable borrower performance. This improvement underscores our continued focus on prudent underwriting and effective risk management. Our stated objective is to achieve one of the best in class credit cost which requires a more balanced and mature portfolio mix for which transition is already underway. We’ve already launched new businesses and they will pick up scale in different proportions over years.
Our cost of borrowing has reduced from 8.04% in quarter one financial year 26% to 7.65% in quarter three financial year 26. That’s around 39 minutes in three quarters. One of the key levers was NCD contribution. It substantially increased from 7% in March 25 to 27% in September 25 and now approximately to a 30 33% as of December 25, adding strength to long term capital funding. Our aim is to ensure stable and cost efficient funding on AI. Out of the total tally of 57 cutting edge AI projects now we reached 30 projects alive.
Let me start with how we think about credit cost and roe because this I believe sits at the heart of how we are building this company. It’s important that we all on the same page. We’re designing a high quality, stable, low volatile credit portfolio not accumulating a balance sheet from an inception. Every product we scale is built to deliver sustainable, healthy roas on a through the cycle basis. Growth is therefore a means to compound intrinsic value, not an objective in itself. Let’s understand the role of individual products, their contribution design, higher natural provision impact and the mathematical average of approximately 12 products and that one business of instant consumer loans making a total of 13 products.
To provide clarity on how total credit costs should be viewed in my assessment, it’s very important to recognize that different lending products inherently carry different risk profiles. Instant loans by design carries a higher standalone credit cost while the remaining approximately 12 lending products are more granular, diversified and comparatively low risk. We expect credit costs across individual businesses to decline steadily over time driven by portfolio seasoning, our solid risk calibration and strong collections, and that’s going to be a big focus area for us.
At the consolidated level, reported credit cost represents, and this is important, a mathematical weighted average reflecting the proportional contribution of the instant loan business and the combined contribution of the other businesses based on their respective share of assets. Accordingly, portfolio level credit cost is a function of portfolio mix and not driven by any single product in isolation. Accordingly, movements in consolidated credit cost should be viewed as a function of changing composition of the portfolio as different businesses scale at different times.
As the portfolio evolves over time, it’s important to note products such as gold loans, education loans, salary personal loans and loans against property are expected to account for 50 to 60% of the portfolio. These businesses have lower inherent risk profiles, lower credit costs and their growing contribution will lead to a more balanced portfolio. In our assessment, with growing roas and a sustained reduction in overall credit cost, let me share our perspective on growth provisioning and accounting optics in the credit context, reported credit clause includes normal and regulatory provisioning and therefore reflects both realized losses and prudent forward looking buffers, management remains focused on continuously improving credit calibration, underwriting discipline and collection efficiencies across individual lending products with an objective strengthening overall portfolio credit performance over time.
Improving ROA is a key focus area for the company and alongside efforts to enhance credit calibration and collection efficiency within individual lending products. Management is equally focused on achieving the right product mix to balance risk and returns and the objective of driving sustainable ROA improvement. NIRAM will share meaningful insights and early risk indicators across products which is quite encouraging. Let me cover my perspective on roas which is going to be a key focus area for the company.
We reached an ROA of 1.2% this quarter Quarter 3 at this junction let me give you a sense of dispersal yield for quarter three financial year 2596. I think this could be an important metrics. The present dispersal yields pricing of new originations for quarter three financial year 26 is approximately 15.5% reflecting the impact of new product launches and disciplined risk calibration across originations. The new products we have launched have scaled well and are performing in line with our internal expectations.
This gives us confidence that growth is now coming from a more diversified and structurally stronger portfolio. On the risk side, credit costs are trending better quarter after quarter. The new credit calibration is behaving well, early indicators are encouraging and we’re seeing improved performance across vintages. As committed we have increased our disclosure where in this time we are sharing product level AUMs across products and I think a very important indicator the risk team is sharing in the investor deck is the six MOB early risk indicators which in my experience is a lead indicator for any finance company in terms of what the new calibration looks like.
At the same time I do believe that operating leverage is beginning to come through. Our operating model is built to deliver structural operating leverage as we scale multiple product distributions, digital platforms, distribution partners and enhanced customer franchise with increasing cross sell strength fueling the strength of operating leverage. Putting all this together, healthy disbursement yields successful product launches, improving credit outcomes and operating leverage. We believe that the structural levers are firmly in place now.
As these trends continue, we see a clear progressive build up over the coming periods. On a customer service front, let me share an important perspective. We are launching a next generation of conversational AI platform for omnichannel customer service designed to autonomously resolve 80% of voice and chat interactions, significantly reducing cost to serve while improving customer experience. Only high empathy and exception cases are rooted to human agent driving operational efficiency and scale.
Our industry first contextual agent UI that delivers real time intelligence including customer history, loan risk flags and sentiment analysis, faster resolution, higher first contact closure and improved compliance. It’s important to note the platform is powered by multi agent AI orchestration and is currently in COG testing with Hindi and English that Will go live by March 26th. Subsequently in phase we will deploy AI voice agent across six regional languages in chatbot in 14 regional languages unlocking mass market adoption across India.
Linguistically diverse customer base. This I believe in my limited view should transform our customer service and make it really smart. Now let me talk about a quick. Sense of the debt strategy. As part of a long term debt strategy we’re never entities to be in the range of 30 35% of our total borrowings. We shall keep following the highest standard of governance and transparency with complete sight of the Alco and the liability management. I shall share some of the key highlights to give you guys a sense in line with the guidance provided during our last call.
We’ve successfully raised over 4,500 4,500 crores by way of secured entities during quarter three as a subset of around 12,330 crores during the nine months. The share of entity in our borrowing stands at 33% as of December 31st NC 7% as of March 31st. This increase in NC borrowing has also contributed significant diversification of it.
Operator
Ladies and gentlemen, the line for the management has been disconnected. Please wait while we reconnect them. Thank you. Sam. Sa. Sam. Sa. Ladies and gentlemen, the line for the management has been reconnected. Oh yes sir. Please go ahead.
Arvind Kapil — Managing Director and Chief Executive Officer
Okay, let me just repeat the previous para. It’ll be our endeavor that AI initiatives will amplify our strength. We’ve initiated 12 AI projects in quarter three financial year 26 across credit collections, servicing and operations to reduce manual effort, improve decisioning and enable higher volumes without commensurate increases in headcount or expenses. Crucially, this leverage is achieved with disciplined risk management. As a result, we believe our past 18 months well calibrated AUM growth coupled with present run rate is expected to translate into sustained profitability driving steady improvements in roe.
And now I’d like to hand over to the Chief Business Officer Vikas Pandey and then subsequently Aragvira Munagar as to give you a sense on the business updates. Thank you Arvind and good evening to all
Vikas Pandey — Chief Business Officer, Consumer Business
Of you. My name is Vikas Pandey. I’m Chief Business Officer for Consumer Business. Over the past few quarters our new businesses have scaled meaningfully with constant emphasis on high quality growth, disciplined execution and technology led efficiency. Our prime personal loan business launched in August 24 continues to gain strong traction. In quarter three financial 26 we delivered average monthly disbursements of nearly 430 crore reflecting growing customer confidence. What is particularly encouraging is the quality of the book over 70% of customers have bureau scores above 750, are salaried with category A corporates and earn net monthly incomes exceeding seventy five thousand rupees.
This validates our risk calibrated acquisition strategy. Digitally we continue to raise the bar. 28% of disbursements for Prime Personal Loan in quarter three were processed fully straight through with zero manual intervention, underscoring our focus on scalable efficient operations alongside digital scale up, we are also strengthening our secured portfolio like Gold Loan. Our Gold Loan franchise is expanding rapidly and we remain well on track with the planned rollout of New year branches during the current financial year.
In Gold loans, monthly disbursements have nearly doubled from 110 crores in September to 207 crores in December 25th. Driven by strong branch productivity, 95% of our branches are in tier 2 and tier 3 markets creating high potential multi product distribution hubs. Early cross sell traction from these catchments is very encouraging. Our next product Consumer Durable business continues to scale efficiently on track to reach 12,000 retail outlets by the year end across 190 plus locations. During the festive month of October 25 alone we disbursed 118 crore to 54,000 customers entirely through a seamless digital journey demonstrating both scale and execution capability.
OEM partnerships are expanding across mobile and consumer durable segments and the PFIN EMI card has seen strong market acceptance with pre approved limits and availability across all touch points and now live on our app and website, the card is becoming a powerful enabler of repeat usage and customer stickiness. Our next product Commercial vehicle business has delivered average monthly disbursement of 100 crores in quarter three financial year 26 representing 35% quarter on quarter growth. UCV financing continues to anchor the business contributing over 70% of disbursements.
We have significantly expanded our channel ecosystem to 700 plus partners up from 450 last quarter and now operate across 55 locations with strong momentum in Gujarat, Rajasthan, Tamil Nadu and Maharashtra. Next Product Education Loan in just 9 months since launch, the education loan business has logged 16,000 plus files supported by a network of 325 plus consultants and partners. By financial year 26 end we aim to expand our consultant network beyond 500 plus. Our disbursement in the month of December has reached 118 crores.
Our instant sanction journey in education loan has crossed 300 sanctions valued at rupees one hundred and fifty crores year till date. Now coming to our digital marketing strategy, it continues to evolve toward a diversified ROI led AI first model with five key focus areas. The first one deepening our digital partner ecosystem. We now work with 38 plus digital partners driving 42% quarter on quarter growth in disbursements while reducing platform concentration risk. Second, the driving cost efficiency through technology led innovations.
Our paid campaigns have seen efficiencies from near real time data sharing and will continue to optimize and drive precision with the upcoming server to server integrations. Third, we have further improved our website performance through faster load times, better discoverability and SEO LED enhancements. We have also stepped up our presence of website through content presence and across relevant external platforms. This has driven over 150% quarter on quarter growth in our visibility across Google’s AI driven search and discovery results.
Fourth, our market martech stack now embeds AI across own channels allowing us to run at scale experiments on content timing channels to drive better retargeting, superior conversions, lower acquisition cost and improved customer lifetime value. Fifth and the last, our contextual and AI enabled brand investments are helping reinforce brand trust and salience while remaining closely linked to business outcomes. So finally across businesses the common thread is very clear. Credit first, compliance first approach, disciplined execution, scale with quality and leverage, AI and technology as a force multiplier.
We are building platform and portfolios designed not just to grow faster but to grow better and compound over time. Thank you and now I hand over to Veer Agavan to give you all a flavor on commercial business.
Veer Agavan Iyer — Chief Business Officer, Commercial Business
Good evening everyone. My name is Veera Agavan Nagyar. I am the CBO for Commercial Business. The commercial business basket of products consists of loan against property, business loans, loan to professionals, medical equipment loans, machine loans, shopkeeper loans and mid market finance. Over the past 18 months we have built a commercial business around three important vectors. The first important vector is people. People are the key to success of any business and we have meticulously worked on the same to build winning teams across verticals.
The second most important vector is distribution. In distribution we have not only worked. To increase our reach into new markets and channels but also work to penetrate deeper in existing markets and channels. This we have done by closely working with our channel partners, using our decade long relationship with them and by providing them with superior tax and service. Also we have invested in our in house direct distribution channel which would operate mainly out of gold loan branches launched sourcing all commercial retail products in the catchment areas and locations.
The third most important vector is infrastructure. By infrastructure I mean process, infrastructure, policy and product. We have concentrated on the three Ps. Of process, product and policy redefined them, re engineered them for customer delight bringing in best in class stats by leveraging on our digital expertise. By doing this we have succeeded in. Growing all commercial products with our Risk First Governance first approach. Here is a detailed breakup of the commercial business numbers Commercial business AEM stands approximately at 33,700 crores exhibiting a very robust growth year on year.
Our LAP AEM stands at approximately 15,100 crores and is the major contributor to the commercial business AEM our unsecured business loan, loan to professionals and Shopkeeper Loan AEM stands at approximately 8,000 crores growing substantially year on year. Our medical equipment and machine Loan AEM stands at 660 crores. We have now built the base to grow this book aggressively going forward. Our mid market AEM which includes NBFC and Supply Chain Finance stands at approximately 9,400 crores. Approximately 72% of the commercial business AEM is secured in nature as mentioned earlier, we started our in house direct distribution channel sourcing all commercial retail products around nine months back and I am happy to announce that this non BSA channel has started contributing approximately 22% of the overall commercial retail loan disbursements.
We are on track to achieve 40 to 50% of the total commercial retail disbursement through the direct channel over a period of time. As the share of the direct channel disbursement increases in the overall mix, it reinforces the strength of the direct distribution non DSA channel leading to sustainable profit of the commercial retail products. On the digital front, we are ready and piloting our straight through digital business loan offering which will be the first of its kind in the self employed space.
We are also enhancing the product suite in the machine loan and medical equipment business by launching the lease business. Summing it up, we believe that the commercial business has methodically implemented the plans with Risk first and Governance first framework and built the foundation for industry leading growth in all commercial business products. As the commercial business remains one of the most important vectors in the overall PFL strategy. Thank you. Now I hand it over to Harsh to brief you on digital and AI initiatives.
Harsh Kumar — Chief Human Resources Officer and Head Artificial Intelligence
Thank you Viraghavan Good evening everybody. My name is Harsh Kumar. I head Artificial Intelligence. I want to take you through what we are doing in AI. AI continues to be a central enabler of our operating model transformation. In Q3 we advanced our AI initiatives focused on lifting productivity, reinforcing governance and streamlining customer and employee journeys. These actions materially strengthen our ability to scale efficiently and deliver sustained performance as we transition towards a more intelligent and data driven operating model, we have built a governance framework for all our AI projects incorporating the seven sutras as defined by the regulators.
This has been adopted to ensure consistency of delivery along with safety and accuracy. To give an update on AI landscape at psl, I would like to take you through few of the major projects introduced across the organization in the last quarter. IT development team has taken significant steps to accelerate and optimize the application development lifecycle with the introduction of Build Buddy, an AI powered assistant acting as a development buddy that aids in writing code and also suggests fixes before code is committed.
It does this by providing contextual feedback on logic, performance and readability along with automated refactoring. The rollout of Dart genie, an AI driven natural language insight engine, empowers internal team to access data insights simply by asking questions in plain language currently available in the operations and HR team. This capability reduces dependency on specialist support and accelerates decision making at scale with plans to extend its reach to other functions including customer service and finance tool within Risk team itself, we have delivered an AI driven solution that aids in post sanction review for the personal owned product by enabling teams to operationalize a comprehensive risk hindsight process.
The system automates document interpretation, field level validation and detailed audit logging, materially improving accuracy, reducing manual intervention and strengthening the discipline of our risk governance. The next step is to extend risk hand scientific framework enabled by AI across broader lending portfolio. To aid our strategic initiative, we have created an AI powered competition benchmarking engineering that on its own searches for changes, analyzes market and competition and delivers timely insight on pricing and product shifts.
By embedding AI into our strategic decision making, we are not just benchmarking competitors, we are building a future ready financial organization that leads with insight, agility and customer centricity. We have our in house employee support assistant PIHR that has been enhanced with additional agent driven capability. The Smarter AI powered solution executes contextual actions such as instant various employment related document generation with improved accuracy and intelligence. By introducing autonomous agent driven workflow, the tool significantly improves employee experience enables HR team to shift their focus towards strategic initiatives.
We have introduced our central KYC AI platform embedding upfront AI driven checks into KYC workflow. This brings intelligent upfront validation of KYC data, reducing manual intervention by roughly 15% and materially strengthening both accuracy and turnaround performance credit AI our AI enabled underwriting support engine has achieved full adoption in personal loan underwriting, significantly enhancing productivity and enabling underwriters to concentrate on risk judgment or manual processing. We have started scaling this across our broader portfolio and the upcoming launch of SARTHI will add a new layer of AI driven portfolio intelligence.
We have also launched a multilingual AI driven conversational agent that initiates call to prospective customers, trains them on key eligibility parameters, validates interest, captures required data, initiates the loan journey before connecting them to respective teams based on their requirements. This brings more contextual and consistent conversation and improves productivity and conversion rates in key customer acquisition units. This solution is currently implemented for specific business unit that plans to extend the same to other product lines.
In conclusion, AI initiatives delivered in Q3 FY 2026 constitute a significant advancement in the organization’s ongoing transformation. They enhance the effectiveness of our workforce, reinforce the robustness of our governance framework and enable a more seamless and intuitive experience for our stakeholders. More importantly, these initiatives further accelerate our long term vision to become a digitally fluent, data driven and highly scalable financial organization with AI first approach being adopted across functions, I would like to now hand over to Mr.
Shriya Meyer, our Chief Credit and Analytics Officer.
Veer Agavan Iyer — Chief Business Officer, Commercial Business
Thank you, thank you Harsh. Good evening everyone. I’m wishing you all confidence of the season. The economic landscape has observed a series of monetary policy adjustments including cumulative repo cuts of 125 basis points in February, GST2 nationalization and tax reforms highlighting government’s aim to support growth and enhance liquidity in the system. Northward movement in the consumer vehicle sales in Q3 FY26 reflects positive movement in domestic demand resulting in improvement in credit uptake.
India’s outstanding loans grew at around 11% year on year and positive economic moments favor growth opportunities. Ponawala Fincop is aligned to this positive moment and focus towards building a resilient portfolio. Effective orchestration of risk calibrated framework has supported growth trajectory ensuring stability and predictability in business performance. Risk credit and collections working in synergy are the backbone of a resilient and well structured portfolio. Focusing on the asset quality, let me give you a glimpse of our key trends.
The GNPA has improved to 1.51% in quarter three FY26 versus 1.59% in quarter two FY26. Over the last four quarters there have been a sequential quarter on quarter improvement in stage one, Stage two and stage three composition of assets which highlights our calibrated approach to portfolio expansion and strengthened debt management practices. Stage 1 Composition in Quarter 3 FY26 is at 97.4% versus 97.1% in Quarter 2 FY26 Stage 2 Composition in Quarter 2 FY26 is at 1.1% versus 1.3% in Quarter 2 FY26.
The Stage 3 the GSC composition in Quarter 3 FY26 is at 1.51% versus 1.59% in Quarter 2 FY26. The quarterly credit cost has improved to 2.62% for the Quarter 3 FY26 versus 2.67% for Quarter 2 FY26 for all products other than the instant consumer loans, the quarterly credit cost has been a range bound around 1.4% to 1.5% for 43 FY26. Our endeavor is to be committed to a stated objective to hold best in class credit costs in the industry. Let me highlight how we are aligning our credit philosophy into action.
The first key aspect being credit by design. We expect a structurally improving asset quality trajectory driven by deliberate choices in product mix and disciplined risk calibration. Portfolio will be focused on products and customer segments that have inherently lower risk and more stable behavioral patterns. Our focus is on salaried low risk. Asset class. Loan against property book has a portfolio LTV of around 45 to 50% of the market value providing higher margin against outstanding principal.
70% of our exposures are extended against self occupied residential or self occupied commercial properties. 85% of our customer profiles being catered to the segment that has a bureau score of 750+ early risk indicator of 6 MOV 30+. Delinquency ratio for lab portfolio remains strong at a sub 0.05% level. Gold loans portfolio is built with a skew towards emerging affluent households with strong upward gold rate momentum. Right customer profile selection gives an additional cushion to unforeseen market fluctuations.
As of Quarter 3 FY26 there are no accounts that have crossed 30 dpd education loan exposures are driven towards students opting for top tier universities, post graduation international courses and well progressive households. Students credibility along with backing from strong parental credit history provides alignment towards financial resilience. Repayment performance is showcasing robust portfolio build up commercial vehicle business offers secured and incoming finance. 75% of our portfolio is built by used commercial vehicles.
60% of the customer segment with large fleet operators providing long term stability. As of Quarter 3 FY26 there are no accounts that have crossed 30 dpd unsecured personal loans to salaried professionals Being built is skewed towards higher bureau score. 70% of our customers have a bureau score of 750 plus. 75% of our portfolio is working with top corporates. The 6 MOV 30 plus delinquency remains range bound at around 0.4%. Instant consumer loan is driven by existing to credit profiles non credit hungry and skewed towards formal credit penetrated cohorts.
Given this is a digitally sourced book, the 3MOV 30+ delinquency metric serves as a more reliable indicator of digital acquisition quality. We are pleased to report that this metric has shown consistent improvement quarter on quarter basis with the Q3FY26 reflecting a 70% improvement compared to Q3FY25. This positive trend underscores the effectiveness of our strategies and continued focus on portfolio quality. Consumer durable funding is skewed to existing to credit along with sizable influence of credit diversified borrowers within ETC segment.
Right cohort selection in consumer durable business also sets precedence to control and minimize cash funding and fraud risk events prevalent in this product at CD is a lower tenure book. The early vintage risks are tracked at a 2 MOV1 plus which is at 0.15% and 3 MOB is at 0.06%. This metric has also been showing encouraging trends over the last three months. Business loans portfolio growth is driven by customer segments with controlled lender position credit history over five years control unsecured leverage non credit hungry profiles profiles with around at least two business cycle seasonings.
The 6 mob 30 plus delinquency trend is range bound for around last two quarters is 1.15%. Pre owned car mix is driven towards profiles with control decency of exposure built seasoned credit history for over five years plus the change in the mix of the portfolio has reflected encouraging reduction of 15% in 6 mob 30 plus performance in quarter 3 FY26 versus quarter 2 FY26 and around 30% reduction as compared to the same quarter previous year quarter 3 FY25. PFL continues to manage risk in alignment with banking standards as reflected in our 30 plus delinquency levels which benchmark favorably against peers.
There has been a sequential improvement in the 6MOV 30 for the last four quarters. The 6MOV 30 for sourcing of quantum and FY26 is 1.34%. This demonstrates the improved quality of a new acquisition. We expect credit costs across each of our individual businesses to decline steadily over the coming years driven by improved portfolio and disciplined risk calculation, strong collection efficiency across products. In addition, we have consciously invested in products that combine high ROI potential with structurally lower credit costs which will further support improvement as the portfolios mature and their size of increases at a consolidated level.
Reported credit cost represents a mathematically weighted average of our portfolio comprising of four business lines and one instant loan business. The consolidated figure primarily reflects a portfolio mix, particularly the relative weight of the instant loan portfolio versus the rest of the portfolio. Accordingly, movements in the consolidated credit cost should be viewed as a function of the changing composition of the portfolio as different businesses scale at different rates over time. Products such as gold loans, education loans, salaried personal loans and loan against property are expected to contribute an increasingly larger share of the portfolio.
These businesses have lower inherent risk profiles and lower credit costs and their growing contribution will lead to a more balanced portfolio with growing roas and a sustained reduction in overall credit cost. Overall, our focus is to build the company on a strong roas and for which we will mix the well calibrated instant consumer loans with the rest of the products. So the mathematical mix of well calibrated portfolios builds a stronger value proposition. Second key aspect as we grow the book is calibration, quality and pace.
The calibration drive is focused on optimized cohort selection via multi source inputs. Information colors is not just limited to existing relationship behavior with pfm. We also look at bureau overall credit exposure history, banking via the account aggregator, GST salary and partner data. Augmentation of risk strategy via in house proprietary models at product and cohort level are used as lever for optimizing risk metrics across the model life cycle. From design to development to post deployment monitoring, the model strength and accuracy is rigorously tested.
This is augmented with a real time through the door monitoring to control the expected PD against the sent benchmarks as we speak. The decisions across credit life cycle are supported by 50 plus AIML models and designed with over 5000 plus feature evaluation. Further, given the portfolio buildup phase, dynamic model calibration with 4 months to 12 months supports the continuous improvement. As I conclude together these step by step execution across origination, risk containment and collections is translating into a structurally stronger portfolio.
This approach is delivering cleaner incoming cohorts, lower embedded volatility and sustained improvements in collection efficiency over the cycle. Thank you and now I hand over. To Mr. Sunit Samrani.
Sunil Samdani — Executive Director
Thank you Sriram and good evening everyone. Let me quickly take you all to the financial highlights. For the quarter the asset under management stood at 55,017 crores representing a growth of 77.6% year on year and 15.3% quarter on quarter. As part of our debt strategy and projected AUM growth, we continue to diversify our liability book focusing on long term borrowings. Hence the share of long term borrowings have gone up by about 4% from 80 to 83 84. In an overall borrowing, the share of variable rate borrowing stood at approximately 50% with another 9% of capital market borrowing with an average tenor of approximately three months.
The judicious use of short term borrowing has helped us maintain our cost of borrowing at competitive level. Our net interest income including fees and other income continue to grow healthy standing at 1080 crores for Q3 of FY26 which is up 19.3% quarter on quarter. This is despite maintaining a healthy share of secured asset book at 56%. The cost of borrowing reduced at 7.65% for the quarter versus 7.69% in Q3 of FY26. This is on account of overall reduction in the interest rate environment in Q3 of FY26.
OPEX to AUM for the quarter was at 4.41% a reduction of 40 basis points quarter on quarter primarily on account of improved productivity and efficiency. Further, this reduction is despite continuous investments in new businesses and distribution. We have expanded our branch network to 320 branches as on date and increased employee strength to 5264 as on 31st of December 2025. Pre provisioning operating profit during the quarter was 528 crore which represents a 36.5% increase quarter on quarter. The asset quality improved quarter on quarter with gross NPA at 1.56% which is an 8 pips reduction.
Quarter on quarter and net NPA reduced to 0.80 against 0 point previous quarter. Our profit after tax stood at 150 crores for the quarter representing 102% growth quarter on quarter and 702% growth year on year. We can now see the benefits of AUM growth and investments in the new businesses coming in. The debt to equity ratio stood at 4.25 times which gives us headroom for growth. The capital adequacy ratio continues to remain healthy and comfortably above the regulatory requirement at 18.17% of which the Taiwan capital is at 17.15%.
The liquidity coverage ratio at 156 as on 12-31-2025 is well above the regulatory requirement of 100%. On the liquidity front, we remain comfortable at a surplus liquidity of 6,488 crores as of 12-31-2025. Thank you. Happy New Year and I would now like to open the floor for question and answer sessions.
Questions and Answers:
Operator
Thank you very much sir. We will now begin the Question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Chintan Shah with ICIC Securities. Please go ahead.
Chintan Shah
Yeah, thank you for the opportunity and congratulations on the strong set of numbers and crossing the 1% ROA mark. So yeah, so my first question is on the asset quality. So if I look at the provision coverage ratio for stage one stage two as well as stage three, it has been coming off since the last four quarters. Since December 24th the stage three PCR is almost down 10 percentage to 48 now versus 57. Even the stage one and two PCR combined is now less than a percentage versus 2.8% a year ago. So considering that 44% of our book is currently still unsecured.
So where do we see this number settling at a steady on a steady state basis? Yeah, that’s the first question.
Veer Agavan Iyer
Yeah. Hi, hi, this is Sriram here. See it’s as I said there is a change in the product mix and if you see your stage one book. Has increased from 97.1 to 97.4 and if you look at even prior to four quarters it was close to around 95 point something. So we are seeing that the stage. One asset itself has increased. So in terms of the overall stage. One, another important point to note here is the stage three book has also reduced from 1.59 to 1551. That kind of explains the reduction in the PCR. Also we will have to note that the reduction in the PCR is also on account of the rundown of the old STPL which had a higher provisioning.
So as a product mix changes and then you have low risk kind of assets, the ECL so also kind of. Changes accordingly and that’s the reason your PCR is lower.
Chintan Shah
So in terms of a steady state, so something around 50% PCR on stage three could be considered from a one or two year perspective.
Veer Agavan Iyer
I can’t comment on that because each product as the as a mix changes and we start scaling up, we may look at time horizon is something which. We’Ll have to look at and based. On which the provisioning will be made. Well,
Arvind Kapil
I think on the calibration, let me just add Chintan that we’ve this time disclosed very precise. I think if I’m not mistaken A year and a half. Approximately six quarters of data for 6 mob which will give very good insight into how we are underwriting and what’s the base information in terms of the quality of on our entire book. I think that could be very, very. Other than stage one that’s another very strong first time we’ve disclosed that should give you a complete insight and confidence into the solid credit calibration underwriting that we have been speaking about.
Chintan Shah
Sure, sure. And so if you could just help me with the write off policy for our unsecured products what would be the write off policy on that?
Shriram Viswanathan Iyer
180dB
Chintan Shah
Over all the products whether a secured Unsecured.
Shriram Viswanathan Iyer
Yeah so unsecured is 180 dbd. Vehicle secured is 365 dbd. Yeah and even loan against property is 730 dbd which actually is case to case basis across industry.
Chintan Shah
Sure, sure. And just one more thing on this 294 branches and currently 320 I think which we mentioned also apart from Gold loan what products would we be currently offering? So what’s the plan there? Just wanted to understand area.
Arvind Kapil
I think our branches that we are talking about are focused. Our Gold loan branches are going to be fairly die hard Gold loan branches. That’s the plan right now and that’s what I had mentioned last time. We are a very focused product on the branches. There will be some benefit of cross sell but I think it’s going to be a very gold kind of branch. It is focused.
Chintan Shah
Understood, understood. And so on this new disbursement which. Is like 20% of the overall
Arvind Kapil
Cross sell might happen but directionally it’s a very focused O loan branch for us. Sorry yeah you were asking questions.
Chintan Shah
No, no sorry that got it, got it. So basically dedicated golden but are some other benefit from crosses and we won’t deny that.
Arvind Kapil
Others cases won’t happen but we are a focus branch is designed for gold. That’s all as a minute point. Yeah sorry over your question.
Chintan Shah
And also on the disbursement from the new products which was currently around 20 percentage for the quarter and 11% of the AUM. So any ballpark targets here. So what kind of percentage in the overall AUM mix are we looking for the new product by the time we reach a lakh crore of aum.
Arvind Kapil
I think see the plan on these new products are they well calibrated? They’re servicing a very distinct objective personal loan is a very salaried. We’re getting fantastic. We are very happy with the way it’s building up acceptability of corporates. You heard that it’s high quality asset. If you look at consumer durable we’re investing behind a customer franchise. If you look at commercial vehicles it’s picked up very good momentum. If you look at gold, I think it’s continuously quarter and quarter building up fantastic.
So objective is going to be we will keep investing behind these businesses to increasing. But remember bulk of the heavy lifting investing has been done and I think we will it will be probably fair to say that operating leverage will start kicking in now and that’s what the whole original plan. So we had said that the first 18 months we would be probably biased to little more aum and investments. I think all that heavy lifting done you started to see probably operating leverage started to kick and you can start seeing the sparks now in terms of probably robust profits you can start smelling that.
And I think we are very excited from here on.
Chintan Shah
Thank you for patiently answering all the questions. I have more but I’ll fall back in the queue. Thank you and all the very best. Thank you.
Operator
Thank you. Ladies and gentlemen, you are requested to limit questions to two per participants. The next question comes from the line of Abhijit Debriwal with Motilal Oswal. Please go ahead.
Arvind Kapil
Yeah. Good evening and thank you for taking my question. The first question is on the CV business. What we heard. Your voice is not audible. You’ll have to be slightly louder. I can’t hear you.
Abhijit Tibrewal
Is it better now?
Arvind Kapil
Yeah, better now please.
Abhijit Tibrewal
Yeah. The first question I had was on the gold loan in the CB business. What I heard during the opening remarks is we have crossed 300 gold loan branches. But when I see our presence it is predominantly the western India, Gujarat, Haryana, Rajasthan, Maharashtra. So if you could just help us understand the idea to first capture share. And consumer durable. Also I kind of heard that 90% of our dealer presence is somewhere in tier 2, tier 2 cities. So what is the playbook which will be there in CD as well?
Arvind Kapil
I could hear your full questions but gold loans I think if you’re asking effective quarter three I think we should be in the range of approximately 19192 somewhere there. But all the Lois identification, all that has been done and the remaining branches we should be on track in this quarter and we should be in a position to build a very solid franchise like I said earlier with a focus on gold. Gold is giving us good yields, good asset class and it’s in line with plan on consumer durable. Whatever little I could hear and please correct me and add to the question, whatever I understood you said what’s the momentum feel on tier 2, tier 3 cities?
I think if I’m not mistaken we already had close to 10,000 plus outlets. And our strategy is mix of consumer durable and because you know we’ve got as a company strong strength on unsecured digital, we don’t need additional manpower and we are finding that that experiment started as an experiment probably. Now along with consumer durable we could be the first company that our resources are not only doing consumer durable but digitally. We have a certain proportion of origination which is coming with the same team on unsecured digital loans and very successfully so.
And remember, just to give you a sense, the consumer durable might have an average ticket size of let’s say 28,000 approximately but an unsecured loan in throughput could be 4.5 to 6 lakhs. So the throughput and productivity of the team with the yields even at the point of origination not at cross sell, we could be the first company to successfully pull it off. That itself gives us a huge advantage on the consumer durable reach and the business model being more robust than a conventional pure only consumer durable model.
And the same team. I hope I’ll be able to get. Across.
Abhijit Tibrewal
And is my line better now? I’m sorry you could not hear me again.
Arvind Kapil
Your voice goes suddenly we can’t hear you. Something like that. But please go ahead. I can hear you clearly.
Abhijit Tibrewal
Okay, sorry, sorry about that. So that answers my question. The only other follow up I had on Gundams was, I mean right, right now I’ve seen the branch presence is predominantly investing India. Is that the thought process to first capture western India, central and northern India and then move to the southern India.
Vikas Pandey
So we, yeah, so we are going to be actually we have covered already Gujarat, we are, you know, Maharashtra, Rajasthan, we are going, you know, state by state. Because Gold loan is a product where you have to have a supervisory depth when it. Because we opening branches. So the next geography which we are picking up now is Karnataka and some part of Odisha. So that is how we will, you know, spread our branches.
Arvind Kapil
You don’t want to just spread yourself in gold. It’s important. We’ve done this business in the past. Very important to have density pockets with supervisory depths. Because one of the biggest advantages and risk is you need very solid controls when it comes to gold branches. You’ll appreciate that. So that’s the background.
Abhijit Tibrewal
Got it. And then the second question I had was on credit costs. Just trying to understand while I think again during the opening remarks I kind of picked up that barring instant loans which have higher credit cost, most other products are showing rangebound credit cost of about 1.4 to 1.5%. So I had two subparts to this question, Arun sir, first thing is, I mean what are the credit costs that we’re seeing right now? Are they all attributable to the the newer and existing products that we earlier had?
So this has nothing to do with any creative items which you have called out in the presentation. These are all business as usual credit cost, right? This 2.6% credit cost that you’re seeing right now?
Arvind Kapil
No, I think. Let me explain that point again. It’s very nice of you to raise it. Again, I think the point that I and Sriram are highlighting is that whether it’s instant loans, whether it’s the remaining 12 products, all individual credit costs are showing constant improvement so far. That’s point number one. I think the limited point we wanted to share with you that as part of our design to optimize when you look at our credit cost you must keep in mind that you should treat it as in simplistic term a mathematical.
Average of instant row consumer loans and. The remaining 12 products. So while explaining I said instant loans relatively by design is higher yield, higher credit cost whereas others are normal yields and normal credit costs more as a reference point. But I think the larger point I. Wanted to say is that when you. Look at our credit cost, look at two important things. It’s a mathematical mix of the 12 products and instant loans. So that let’s say the contribution is 15, 18 or 20 because individually all products might actually land up reducing in our credit costs and we could have a great opportunity for ROA built up.
So it’s a very limited point just to understand also looking at our growth rate, Please remember as NBFCs you have. A higher natural provisioning so that also. Confident if you grow at a higher rate becomes part of your total credit cost. It’s just sensitizing the total picture. That’s about it.
Abhijit Tibrewal
Got it. And when we said that credit costs will reduce in the coming quarters and years the primary driver is going to be the improvement in product mix in favor of gold loans. Slack education loans. Right. Rather than the seasoning of these products because once this season maybe the credit cost will start inching up. So the primary driver is going to be primarily the improvement in product mix.
Arvind Kapil
Let me Repeat again. All 13 products with seasoning are expected and calibration and strong collections are in our assessment expected to constantly improve every Quarter, that’s point number one. Point number two, it’s in our hands. How do I mix it for respective total credit cost to optimize the roas of the company as from here on roas will become an important thing. So let’s say for example hypothetically saying you have an X product at a credit cost of Hypothetically let’s say 2% and you have another credit cost at let’s say 3%.
Now either you take 5050 and have a credit cost total or you can have a 6040 and do it. Similarly when you have a mix of approximately 12 to 13 businesses. All we are saying is that the mix will be optimized. So you actually might land up with quarters going. The 2% might become 1.8 and the 3% might become 2.8. But the mix could be in such a manner which could reflect the total credit cost that you actually might actually land up making very healthy roas despite individually improving thanks to collections, thanks to product season and our credit calibration.
That’s why I said you must check our 6 mob. Because Trivalji, if you check our 6 mob you will get the pulse. Not only is the stage one improving which is one part of the story, not only the GNP improving, that’s another part of the story. But if you see carefully six mob normally in any banking or finance business is a very solid indicator of what is the quality of calibration that you’re doing across portfolio and you will get a firsthand sense of how individual products will be fairly solid.
Abhijit Tibrewal
Got it. This is very useful and thank you so much for your enhanced disclosures in this quarter. And lastly this board approval for 5,500 crores of press equity issuance in this quarter. We plan to consummate it this quarter or after the end of this fiscal year. Hello, am I audible? Yes. So just last thing I was asking. Today we have taken board approval for raising 5,500 crores of fresh equity. We plan to consummate it this quarter or after the end of this fiscal year. Okay, so then maybe I’ll come back in the question.
Thank you.
Operator
Thank you.
Arvind Kapil
Are you talking about the capital raise? If I get you right? If you are then I think we’ve. Taken a 12 months approval approval. But I think you’re well aware of our growth rates.
Operator
Thank you. Sir.
Arvind Kapil
The next question
Operator
Comes from the line of Mr. Chavate with quota constitutional equities. Please go ahead.
Abhijit Tibrewal
Am I audible?
Operator
Oh yes sir, you’re audible. Please go ahead. Okay,
Nischint Chawathe
Okay, okay. No, I just Just want to double check the management line is connected.
Operator
Yes, sir, they are connected. Go ahead.
Nischint Chawathe
So you know, across these 13 products, how do you think you know about the duration of the book? Let’s say across short, medium and long tenors, how are you really kind of thinking about balancing this? And in that sense, you know, is there a little bit of a scope to play the yield curve? I believe you have increased the duration of the liabilities in the last two, three quarters. So on the asset side, first of all, you know, how are you thinking about, you know, contribution of short, medium and long terminals?
And you know, what could be? I mean, are you kind of targeting a particular, you know, average duration of the book? And in that sense, how are you placed on the liability side?
Shriram Viswanathan Iyer
Yeah. So see, across these 15 products, these are into different tenor buckets, right? From say ultra long term, something like Loning is property to consumer durable. Okay. Which is ultra short term. So I think the products are now there in every space, okay. Of duration, which we want to be. And like Arvind articulated, we look at how these products, okay. Ramp up and which gives us better risk adjusted return. So basis that I think we are pretty fine with the duration being six months here and there because we have a well diversified liability profile and have the capability to raise money in every single tenor bucket on the liability side.
And right now also if you look at our alm, it is positive across each of the buckets except that three to five years which anyway with the capital raise, okay. Would be taken care. So I think, I think that’s fine. So we are flexible. Okay. On duration. So there’s no specific.
Abhijit Tibrewal
What is the current duration of the book?
Nischint Chawathe
On the asset side.
Shriram Viswanathan Iyer
Current duration of the asset. Okay. Would be somewhere between two and a half to three years. Okay. And
Nischint Chawathe
Does it kind of change? You know, maybe in a year or so when you know the contribution of your product goes up or you is this the kind of.
Shriram Viswanathan Iyer
While it may not change dramatically, but I like I said, it will depend on the evolution of each of the products and the way they scale up. So this is that. But, but I think we are pretty broadly should be there. We’ll take care of whichever way it goes. Yeah.
Operator
Thank you. The next question comes from the line of Kaitung Shah with Anandrati. Please go ahead.
Kaitav Shah
Yeah, thank you so much for taking my question. Am I audible? Yes,
Operator
You’re audible.
Kaitav Shah
Yes. First of all, congratulations, good quarter and thank you so much for the increased disclosure. I think they’re pretty useful. So my question is more on the operating leverage. I think you already pointed out that we’ve seen signs of improved operating leverage. And do you think this trend can continue or there is still some investments that are left to be done at an overall aggregate level which can keep the cost to income ratio popped up?
Arvind Kapil
I think see the very fact our design had, to be honest, a lot of investments, strategic investments which we did over the last or this financial year. And if you ask me, the trade off is in complete favor of operating leverage. Not that you won’t make incremental sales teams and not that you won’t have new branches. You’ll have a certain proportion of that investment which are going on. But I think it’s usually in favor of operating leverage from now on. And I would term this as we would be excited from here on.
On the operating leverage side
Sunil Samdani
Additionally the. OPEX in percentage terms. OpEx,
Arvind Kapil
Yeah, but that we’ve said every year directionally it should. I think you mentioned cost to income and I think probably it will be heartening to see similar trends there as well as the years go by.
Kaitav Shah
So. Got it. Sir, second question was on the AEUM growth front we have been far ahead of our long term aspirations. Do you think near term we would like to raise our guidance on the growth aspect, especially next year or we would still like to stick to what we.
Arvind Kapil
Speak a little louder if you don’t mind. I can hear you but I in. Between I’m not able to figure out what you think.
Kaitav Shah
Okay. Sir, on the growth front, would you like to reiterate the target because we’ve been growing slightly higher than our long term averages. So near term will be continue to grow higher. Given that the new products are firing much better than expected.
Arvind Kapil
Our focus is going to be completely biased to the retail products, the full bouquet of retail products, especially the new ones. But I think our broad guidance of 35 to 40% is what I like to say is a good guidance. There could be some movements where we may have had much better than that. But I would probably hold that broad approach directionally to be 35 to 40 is what I would like in today’s economy.
Operator
Thank you. Ladies and gentlemen, this will be our last question. It’s from the line of AGAM with AGAM Investments. Please go ahead.
Abhijit Tibrewal
Thanks for the opportunity. Quick question on the so for this quarter was around 2.62%. So going ahead, what can be this. So what should one look like? Sorry to interrupt.
Operator
Could you please repeat your question again?
Abhijit Tibrewal
Sir, I can’t hear you. Am I audible now? Yeah,
Arvind Kapil
Better. Yeah,
Shriram Viswanathan Iyer
Yeah,
Abhijit Tibrewal
Yeah. I’m saying the credit cost for this quarter so going ahead as you said it will go down. What can it be? Any thoughts or color on that?
Veer Agavan Iyer
We are not giving any forward guidance but we kind of as the contribution of the new products such as gold loans, education loan tier prime and all of the new products keep growing and gain full scale participation in the product basket. The share of the credit calibrated instead book will be normalized at a lower level and this will have a favorable bias on the overall credit cost.
Abhijit Tibrewal
Okay. Okay, that’s the last question on the part. I think the. Maybe I missed the voice. Can you repeat like what is that? So we have taken the amendment for 12 months. What is the timeline realistically we are looking to close since we are growing at much faster pace.
Shriram Viswanathan Iyer
Yeah, yeah. So we’ll basically look at. Okay the way the growth pans out. Okay. From here on and basis that. Okay. Which will do the capital raise. So we don’t have a specific timing in mind. Right. I think you know the part is
Arvind Kapil
That we’ve taken the approval gives us the strategic flexibility now and it’s in our control and we are well but on top of it. I think that’s a limited point and we are. There’s no particular guidance we are giving on the timelines.
Operator
Thank you sir. Ladies and gentlemen, that was the last question for today. With that we conclude today’s conference call on behalf of Poonala Fincorp Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.