ESAF Small Finance Bank Ltd (ESAFSFB) Q3FY26 Concall Summary - Dec-2025 Qtr
Key Takeaways
- Credit Cost Normalization: In response to an analyst's query, management clarified that credit costs have already started moderating on a QoQ basis and a visible improvement towards normalization will be seen from Q1 FY27. The long-term, normalized credit cost for the bank, given its increasing secured book, is estimated to be between 2% and 3%.
- Return on Assets (ROA) Trajectory: When questioned about the steady-state ROA profile with the new portfolio mix, management stated that it would take time to stabilize. They are targeting a steady-state ROA of 1.5% to 2%, which they expect to fully achieve by FY28, as some legacy issues are still being absorbed.
- Loan Growth Guidance: Management provided specific guidance for loan growth, projecting around 25% for FY27. For the current fiscal year (FY26), they expect to close with a growth rate of approximately 15-16%.
- ARC Sale and Write-offs: An analyst inquired about write-offs in the microfinance book. Management clarified that there were no technical write-offs during the first nine months of FY26. However, there was a sale of NPAs to an Asset Reconstruction Company (ARC) amounting to INR 1,018 crores in the nine-month period.
- Microfinance Net NPA: When asked for the Net NPA figure specifically for the microfinance portfolio, management stated they would share the number offline.
Performance Overview
- The bank reported a significant turnaround in Q3 FY26, returning to profitability after a period of consolidation, driven by improved asset quality and operational efficiencies.
- A key strategic shift towards secured lending under the 'MARG' framework (MSME, Agri, Retail, Gold) is well underway, with the secured portfolio now constituting 60% of total advances, up from 45% a year ago.
- Asset quality showed marked improvement, with a sharp reduction in Gross and Net NPAs, and a significant decline in quarterly slippages, reflecting tighter underwriting and a stabilizing microfinance environment.
- The bank witnessed strong, broad-based disbursement growth of 134% YoY and 46% QoQ, with secured assets accounting for 81% of new lending, reinforcing the success of its portfolio diversification strategy.
- Management expressed confidence in sustained quarter-on-quarter improvement across all parameters, positioning the bank for a new phase of sustainable, high-quality growth in the upcoming fiscal year.
Financial Metrics
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Operating Performance / Business Segments
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Key Discussions & Insights
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Outlook and Guidance
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Industry / Competitive Landscape
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Overall Summary
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