Paisalo Digital Ltd (PAISALO) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Paisalo Digital Limited Q2 FY '27 Earnings Conference Call, hosted by Elara Securities (India) Private Limited. Before we begin, let me draw your attention to the fact that today's discussion may include certain forward-looking statements, which are predictions, projections, or other estimates about future events. These statements reflect management's current expectations about future performance of the company and are subject to various risks and uncertainties that may cause actual results to differ materially. 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 this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference call over to Mr. Manmeet Khimavat from Elara Securities. Thank you, and over to you, sir.
Manmeet Khimavat (Elara Securities): Thank you. Hello and good evening everyone. On behalf of Elara Securities, I thank you all for joining the Q2 FY '27 earnings conference call of Paisalo Digital Limited. Today, from the management, we have Mr. Shantanu Agarwal, Deputy Managing Director; Mr. Harish Singh, CFO; and Mr. Gaurav Chaubey, Chief Business Officer. I will now hand over the call to Mr. Shantanu for his opening remarks, post which we can open the floor for questions and answers. Thank you and over to you, sir.
Shantanu Agarwal (Paisalo Digital Ltd): Good afternoon, everyone and thank you for joining us today for Paisalo Digital's earnings call for the quarter ended September 30th, 2026. I hope you have had the opportunity to review our earnings presentation, which has been shared earlier on the exchanges and is also available on our website. We are pleased to share that Paisalo has delivered another quarter of healthy performance with continued progress across growth, distribution, technology, and asset quality. More importantly, the investments we have made over the past several quarters are increasingly translating into operating outcomes, reinforcing our confidence in scalability and resilience of our business model. Let me begin with a brief perspective on the operating environment. The Indian economy continues to demonstrate resilience despite global uncertainties, supported by healthy domestic demand and broad-based economic activity. The RBI has maintained a constructive outlook, revising its FY '27 real GDP growth estimate to 7.1% in its latest monetary policy, while the recent 25 bps point repo rate increase reflects a calibrated approach to inflation management. At the same time, uneven monsoon conditions have affected sentiment in certain regions and rainfall deficit pockets warrant continued monitoring. Against this backdrop, we remain focused on balancing growth opportunities with disciplined risk management. Our diversified portfolio provides an important degree of resilience in this environment. Agri and allied segments account for approximately 15% of the portfolio, while the balance diversified across food and hospitality, street vendors, healthcare, education, technology, manufacturing, textiles, transport, and MSME and micro-enterprise activities. Our geographical presence across 23 states and more than 10,000 pin codes provide significant diversification and granular- granularity, reducing concentration risk, while creating access to a vast, underserved market opportunity. Over the past several quarters, we have continued to strengthen our technology and risk management capabilities. A proprietary underwriting framework combines on-ground engagement with geospatial intelligence, alternate data, and AI-driven analytics, while our AI-enabled portfolio monitoring platform provides real-time visibility, early warning indicators, and dynamic risk assessment. These capabilities are reflected in the health of our portfolio, with collection efficiency at 98.3%, gross NPA at 0.66%, and net NPA at 0.46% at the end of the quarter. This gives us confidence in our ability to scale while maintaining disciplined asset quality. During the first half of this fiscal year, we have made significant progress in broadening and diversifying our access to capital markets. We have successfully raised approximately INR294.9 crores through our public NCD issuance under the INR900 crores shelf program, followed by a INR124.47 crore listed dual-rated unsecured private placement of NCDs in September. We have also raised over INR177 crore through commercial paper issuances during H1 FY '27, further enhancing our funding flexibility and liquidity position. A significant portion of this funding was raised towards the end of the quarter, which temporarily impacted reported yields. We expect yields to normalize and the incremental interest income contribution to progressively follow through. At the same time, the enhanced balance sheet capacity provides greater headroom for an improvement in ROE as deployment scales up. Supported by strong capitalization, increasing operating leverage, a rapidly expanding distribution network, and accelerating digital orientation, Paisalo is well-positioned to capitalize on the strong demand environment. The festive season, resilient consumption trends, and continued execution across our platform provide a solid foundation for sustained growth. Let me now turn to our broader strategy. Our growth is anchored around four reinforcing pillars: distribution, product diversification, technology and AI, and liability management.
Shantanu Agarwal (Paisalo Digital Ltd): They are reinforcing one another and strengthening the quality, efficiency and resilience of the franchise. Distribution remains at the heart of our growth strategy. During Q2, our footprint expanded to 6,415 touchpoints across 23 states, comprising 426 branches, 4,299 distribution points, and 1,690 business correspondent touchpoints. Importantly, our expansion combines a branch-led presence with an increasingly asset-light distribution model, enabling us to deepen penetration in existing markets while expanding into new and contiguous geographies. Our customer franchise has correspondingly scaled to approximately 20 million, providing a significantly larger base for future growth and engagement. Our business correspondent network is an important strategic component of this distribution architecture. Partnerships with State Bank of India, Bank of India, and Indian Overseas Bank give us last-mile connectivity across underserved markets and deepen our participation in the formal financial ecosystem. During Q2, the BC network expanded to 1,690 touchpoints and served approximately 1.93 million customers across services ranging from account opening, fund transfer, to social security products and micro-credit. Importantly, we see this channel as more than a transaction network. Over time, it can create a broader customer ecosystem for Paisalo and strengthen the foundation of future credit acquisition and cross-sell. Our second pillar is product diversification. As the distribution franchise scales, the opportunity is not simply to reach more customers, but to address a broader range of financing needs within the ecosystems where we already operate. We, therefore, intend to progressively broaden our product suite around the core MSME and micro-entrepreneurs franchise through an increasingly partnership-led and asset-light approach. This should allow us to improve distribution productivity, diversify our growth avenues, and deepen customer engagement while maintaining disciplined underwriting. Our third pillar is technology and AI, where we continue to make meaningful progress. During Q2, AI-enabled onboarding processed approximately 190,000 applications, while AI-driven outbound calling scaled to approximately 3 lakh calls daily. We now have 25 live AI bots across the organization. More importantly, AI is increasingly embedded across the lending lifecycle, from sourcing and onboarding, to underwriting, portfolio monitoring, collections, and customer engagement. These capabilities are helping improve turnaround times, strengthen monitoring, and reduce manual intervention. We are also beginning to see these investments translate into operating efficiency. Despite 33% year-on-year growth in AUM and continued expansion of our network, our employee base declined by 11% year-on-year during the quarter. We see this as an early evidence of increasing operating leverage as technology and automation enables us to scale business volumes without a commensurate increase in operating resources. Our fourth pillar is liability management, where the focus remains on diversification, funding flexibility, and cost efficiency. The progress made through public and private NCD issuances, commercial paper, and proactive debt management has broadened our funding architecture during the first half. As Paisalo scales, this increasingly diversified liability franchise should provide greater flexibility in funding growth while supporting balance sheet efficiency. Taken together, our progress across distribution, product diversification, technology, and funding is strengthening the scalability and resilience of our franchise. We believe Paisalo is well-positioned for the next phase of growth. The platform we have built across distribution, products, technology, and funding is stronger and more scalable today, giving us the ability to pursue significantly larger opportunities while remaining disciplined on risk, capital, and returns. We thank our investors and stakeholders for their continued trust and support as we build a more resilient, technology-led, and financially inclusive company. With that, let me hand over the call to Mr. Gaurav Chaubey, our CBO, to share his perspective on the operating environment before we move to the detailed financial performance. Thank you.
Gaurav Chaubey (Paisalo Digital Ltd): Good afternoon, and thank you. Let me share our perspective on the operating environment, the areas where we are seeing some pressure, and importantly, the action we are taking to protect portfolio quality while continuing to capture attractive growth opportunities. The 2026 Southwest monsoon ended at about 87% of the long-period average, with considerable regional variation. Even so, Kharif sowing is down by only by about 1% year-on-year and covers 101% of normal acreage as irrigation and stable reservoir levels have helped offset the rainfall shortfall in most regions. The pressure is concentrated in
Gaurav Chaubey (Paisalo Digital Ltd): with Maharashtra, the most impacted state this season, and parts of Karnataka, Andhra Pradesh and Telangana also receiving patchy below-average rainfall. Certain districts have been declared drought affected. Customer demand in these areas has been relatively muted and we have responded by tightening underwriting guardrails, moderating rural disbursements in drought-related districts and stepping up collection efforts in these locations. Bihar experienced higher than expected rainfall in the latter part of the monsoon along with flooding in certain areas. Given our relatively limited portfolio exposure in the region, we currently expect the overall impact on our portfolio to remain manageable. For agri-equipment finance in agrarian belts, repayments are typically structured half-yearly installments around the end of rabi and kharif seasons, so it is still early to draw definitive conclusions on portfolio performance. We have also moderated our B2B business in certain drought-affected markets across both urban and rural locations, acting proactively wherever early cohort indicators began to move. Looking ahead, rural indicators remain broadly supportive with vehicle registrations in rural and semi-urban areas growing at marginally higher pace than in urban and metro markets during the first half. The kharif outcomes should become clear by end of October or early November and we expect rural cash flows to improve after the harvest. State and central governments have been proactive in drought-affected areas, which should help soften the impact on rural households. Early October business momentum has been encouraging and the overall collection efficiency in our rural business portfolio continues to remain high. Despite seasonal backdrop, demand remains visible in mobility, machinery and other movable asset financing in Maharashtra supported by industrial and urban activity. In Uttar Pradesh, demand remains healthy across mobility and agricultural segments, while Haryana and Rajasthan are seeing opportunities in machinery and mobility financing supported by manufacturing, mining, construction, infrastructure, and agriculture agricultural mechanization. Delhi and NCR continues to see broad-based credit demand across commercial, trade, transport and service activities. More broadly, we are seeing an uptick in credit offtake among MSME and SME borrowers across several emerging markets driven by working capital and business expansion needs. Overall, while we remain watchful in specific rural and agricultural pockets, the broader demand environment remains supportive. Our approach is to stay agile, calibrating growth at the cohort and geographical level while preserving underwriting and collection discipline. With that, let me hand over to Mr. Harish Singh, our Executive Director and CFO, to take you through the financial performance in greater detail. Thank you.
Harish Singh (Paisalo Digital Ltd): Good afternoon, and thank you. Let me take you through Paisalo Digital's financial performance for the second quarter of financial year '27. Quarter 2 financial year '27 reflected continued scaling across the franchise. Assets under management reached 72,659 million as of September 30, 2026, representing growth of 33% year-on-year. Disbursements increased by 42% year-on-year to 15,673 million during quarter 2 and reached 32,982 million for H1 financial year '27, representing 77% year-on-year growth. This reflects healthy underlying credit demand and the increasing scale of our distribution and origination capabilities across customer segments, products and geographies. Total income for the quarter increased by 24% year-on-year to 2,773 million, while net interest income grew by 17% to 1,476 million. For H1 financial year '27, total income increased by 21% year-on-year to 5,376 million and net interest income grew by 17% to 2,923 million, reflecting the continued scale up of the loan book. Profit before tax for quarter 2 financial year '27 increased by 27% year-on-year to 874 million, while profit after tax grew by 27% to 656 million. For H1 financial year '27, profit before tax increased by 28% to 1,696 million and profit after tax grew by 29% to 1,270 million. Our return ratios also remained healthy with return on asset at 3.3% and return on equity at 13.4% for quarter 2 financial year '27. Importantly, return on equity improved from 11.8% in the corresponding quarter last year, reflecting our continued focus on
Harish Singh (Paisalo Digital Ltd): profitable growth while scaling the franchise. Asset quality to improve supported by disciplined underwriting, proactive portfolio monitoring, and our collections architecture. Gross NPA improved by 15 basis points year-on-year to 0.66% as of September 30, 2026, while net NPA improved by 19 basis points to 0.46%. Collection efficiency stood at 98.3%. Credit cost declined to 0.4% in quarter 2 financial year '27 compared with 1.1% in quarter 2 financial year '26, while H1 financial year '27, loan losses and provisions declined by 47% year-on-year to 155 million from 295 million in H1 financial year '26. Turning to the balance sheet, total borrowings stood at 54,808 million as of September 30, 2026. Our cost of borrowings declined by approximately 15 basis points year-on-year to 10%, reflecting the continued diversification of our liability franchise. Debt-to-equity stood at 2.89x, while capital adequacy remained healthy at 30.7%, including Tier 1 capital of 25.2%. Our ALM position remained comfortable with a positive gap across buckets. As we enter the second half of financial year '27, our priorities remain focused on sustaining growth, improving funding efficiency, maintaining asset quality discipline, and translating that increasing scale of the franchise into sustainable returns and long-term value for all our stakeholders. Our balance sheet and capital position provide us with the capacity to support this next phase of growth while maintaining financial discipline. Thank you. With that, let me hand the call back to the moderator.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Sandeep Mehta from Evaluate Research, please go ahead.
Sandeep Mehta (Evaluate Research): Yes, good afternoon. Congratulations on a very strong set of results across the board. And, and well done job on investor relations with your presentation and this conference call. My, first question is with the RBI now raising rates, can you comment a little bit on how that will impact you in terms of, lending and borrowing yields and your net interest margin? You mentioned that you had some borrowings at the end of the quarter and you expect your yields to normalize. But how do you think this plays out over the next few quarters, please?
Shantanu Agarwal (Paisalo Digital Ltd): Thank you, Sandeep. So in terms of the RBI raising rates, as you might have heard, in a recent statement also by the honorable governor, he said that he's not expecting any more rate cuts going forward for the next couple of quarters. And there should be an incremental impact. I mean, if you see the morning today, G-Sec also was up about 50 basis points. So we definitely expect that there is going to be about a 25 to 30 bps increase, which we have already priced in. By the way, if you remember, in quarter 1, we gave our full year guidance of finishing our cost of funds at 10.5%. And, you know, we've been we are currently at the end of quarter 2 or half year 1, we're standing at 10%. So that cushion is definitely built into the system. Thank you.
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