This article first appeared on GuruFocus. Release Date: November 06, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Positive Points India Shelter Finance Corporation Ltd (NSE:INDIASHLTR) delivered a strong 26% year-on-year growth in gross AUM to Rs. 11,997 crore, remaining on track to achieve its FY30
India Shelter Finance Corporation Ltd (NSE:INDIASHLTR) delivered a strong 26% year-on-year growth in gross AUM to Rs. 11,997 crore, remaining on track to achieve its FY30 target of Rs. 30,000 crore.
The company has consistently delivered a Return on Equity (ROE) of over 17% for six consecutive quarters, despite a leverage of only 3x, indicating significant headroom for future growth.
India Shelter Finance Corporation Ltd (NSE:INDIASHLTR) reported healthy disbursements of Rs. 1,126 crore, a 21% year-on-year growth, with management expecting this momentum to continue into the second half of the year.
Asset quality remains stable with Gross Stage 3 and 30+ Days Past Due (DPD) at 1.5% and 5.2% respectively, while collection efficiency improved to 98% from 97% in the previous quarter.
The company is making progress on its digital sourcing journey, with disbursements through this channel increasing from 4% in Q2 FY26 to 7% in Q2 FY27, which is expected to improve productivity and efficiency.
Negative Points
India Shelter Finance Corporation Ltd (NSE:INDIASHLTR) reported a higher credit cost in H1 FY27 at around 55 basis points, requiring a significant pullback to ~30-35 basis points in H2 to meet its full-year guidance of 50 basis points.
The company’s disbursement growth in H1 FY27 was flat to slightly negative, partly due to a change in disbursement recognition norms that impacted the AUM denominator by Rs. 350-400 crore.
India Shelter Finance Corporation Ltd (NSE:INDIASHLTR) has opened only 8 branches in H1 FY27 against its full-year guidance of 40-45 branches, raising concerns about the pace of its expansion plans.
The company’s co-lending disbursements have stalled over the last three quarters due to regulatory changes (RBI’s CLM1 model) and new GST guidelines, making the proposition less lucrative.
India Shelter Finance Corporation Ltd (NSE:INDIASHLTR) faces potential margin pressure from a rising interest rate environment, although it expects to mitigate this through levers like a future rating upgrade and repricing new disbursements.
Q: Credit cost came in at ~55 bps in H1, yet you maintain a full-year guidance of ~50 bps, implying a sharp pullback to ~30-35 bps in H2. How confident are you, and what drives the improvement? A: CFO Ashish Gupta explained that H1 typically carries higher credit cost due to seasonality, while H2 is more favorable. Q2 included a scheduled write-off of about Rs. 6 crore (accounts overdue beyond two years) per company policy, which is a timing matter. He also noted the transition to clearance-basis disbursement booking reduced the AUM denominator by Rs. 350-400 crore, optically inflating credit cost. Management is confident of staying within the 40-50 bps guidance, with the full year likely at ~50 bps, as recoveries gain momentum in H2.
Q: With yields and cost of funds broadly stable, how do you see liability repricing in a rising rate environment, and have you raised lending rates in any segment? A: CFO Ashish Gupta said recent borrowings are at ~8.2%, in line with the blended cost of funds, and historically only ~40% of repo rate changes transmit to cost of funds. Offsets include a rating upgrade expected in a couple of quarters (worth 15-20 bps), repricing power on new disbursements (30-35% of AUM annually), and the 53% variable/semi-variable portfolio. He added that ~20% of borrowings are fixed rate and 50% are MCLR-linked with limited transmission, so only 35-40% pass-through is expected. Margins should stay well above the guided 6% spread.
Q: Of the 53% variable and semi-variable portfolio, how much is truly variable, and how quickly can you reprice if needed? A: CFO Ashish Gupta clarified that ~15% of the portfolio is variable rate and ~38% is semi-variable. The semi-variable book (three-year fixed-then-floating product) begins converting to variable from Q4 FY27, adding roughly 4-5% per quarter to the variable bucket over three years. Any cost-of-funds impact would be passed on to customers with about a quarter’s lag.
Q: H1 disbursements look flat to down ~2% YoY even after the Q1 recognition change. Has the transition normalized, and what is the outlook? A: MD Rupinder Singh said Q2 FY27 disbursements of Rs. 1,126 crore were the highest in company history and better than H2 quarters historically. He expects full-year disbursements to grow ~20%+ and AUM growth of 25-27%, with H2 building on Q2 momentum. The Q1 clearance-basis transition impact of Rs. 350-400 crore should be made up in H2.
Q: You guided for 40-50 new branches this year but opened none in Q1 and only about eight in Q2. Are you still on track? A: MD Rupinder Singh explained that most branches were opened in H1 of the prior year, and the company was in a transition mode improving and tweaking processes. With those branches now stabilized, branch expansion can resume, and he expects to reach the planned 40-45 branch additions in H2.
Q: PAT growth was cited at 28% normalized for lower direct assignment (DA) income. What is the normalization, and does the 25% full-year guidance include DA? A: CFO Ashish Gupta explained that DA transactions involve upfronting future interest income, and last year had higher DA volumes than this year. Normalizing for this, H1 PAT growth is ~28%. The full-year ~25% PAT growth guidance includes DA transactions; if H2 sees improved DA volumes, the company stays on track.
Q: What is holding back the credit rating upgrade, and when do you expect it? A: CFO Ashish Gupta said rating agencies weigh scale, vintage since the last upgrade, and portfolio mix. The company has completed about 2.5 years since its last upgrade, while agencies typically look for a three-year vintage. There are no reservations on HL/LAP mix. With three agencies (India Ratings, CARE, ICRA), upgrades are expected as each hits the three-year mark, and the company is pitching for an early upgrade.
Q: LAP is ~44% of AUM versus the regulatory expectation of below 40%. Will incremental growth shift to home loans, and how does that affect NIM? A: CFO Ashish Gupta clarified the 60% home loan requirement applies at the balance sheet level, not portfolio level. The company maintains ~68% home loans at the balance sheet level and ~63% on the RBI basis (including liquidity and non-housing loans), well above the threshold. It uses DA transactions on the LAP book to stay compliant, so incremental HL/LAP mix need not change much; ~57-58% home loan disbursements suffice.
Q: AUM growth has trailed the 25-30% guidance for two to three quarters, at ~23% in Q2. What are the reasons, and how confident are you going forward? A: CFO Ashish Gupta attributed the gap to the Q1 transition to clearance-basis disbursement accounting, which trimmed AUM by Rs. 350-400 crore (~3.4% of growth). Normalized, growth is ~27%, and he expects ~27% AUM growth this year, improving further next year once the transition impact lapses. MD Rupinder Singh added that the process changes are complete and the focus is now on restoring growth momentum.
Q: With 30+ delinquency at 5.2%, slightly above affordable peers, and rising over the longer term, will this affect DA pool demand? What rates are you seeing on DA pools? A: CFO Ashish Gupta said the self-employed, ~Rs. 10-11 lakh ticket segment has slightly higher delinquency, especially sub-Rs. 8 lakh loans, but delivers strong ROIs of ~20%, so the blend is deliberate. About 12 bank partners have consistently picked up the self-employed pools over five years. DA pricing runs 15-20 bps above the ~8.2% blended marginal cost of funds since buyers absorb credit cost, keeping DA at par with other funding on a P&L basis.
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