• AUM grew 23.5% YoY and 5.5% QoQ, on track to achieve 29-30% full-year FY26 growth guidance
• Disbursements grew 35% YoY to INR 1,310 crores in Q3, adding 41,015 new borrowers
• Collection efficiency improved significantly: non-OD bucket at 99.4% in Feb'26, bucket-1 collection at 60% in Feb'26 vs 42.8% in April
• Mortgage portfolio reached INR 1,350 crores (21% of total AUM), up from minimal presence 3 years ago, with 180 dedicated branches and 1,300+ team members
• Network of 527 branches across 18 states and 3 union territories with strong geographic diversification (no single zone dominates)
• Loan book shows 5.23 lakh granular loans with diversified industry mix: 50% trading, 21% manufacturing, 18% services, 11% dairy
• Technology-driven operations: 100% paperless origination, 32% AI/ML underwriting acceptance, 96.8% customers on ACS, 84.1% digital collections
• Repeat loans drive efficiency with 3.33% low foreclosure rate in 9M FY26, telecaller model generates INR 1.8 crores disbursement per month

iFinance (AYE Finance) delivered a strong Q3 FY26 with 23.5% YoY AUM growth to INR 5,773 crores and 87% YoY PAT growth to INR 43 crores, demonstrating resilience in their unique unorganized micro-SME lending model. Management expressed high confidence with improving collection efficiencies (99.4% in Feb'26), declining credit costs (down to 4.69% from elevated levels), and provided ambitious 3-year guidance of 30% AUM growth with 4-4.5% ROA targets, supported by expanding mortgage portfolio (21% of book) and strong branch productivity gains.

Total income for Q3 FY26 was INR 449 crores, growing 21.3% YoY and 5% QoQ. PAT reached INR 43 crores, up 87% YoY and 23.4% QoQ (absorbing a one-time INR 1.7 crore impact from labor law changes). NIMs remained stable at 14.21% despite increasing mortgage mix. Cost of borrowing declined to 10.96% with incremental cost at 10.31%. Credit costs showed consistent quarterly decline, reaching 4.69% (INR 83 crores) in Q3 from elevated levels, with management targeting to reach normalized 3.25-3.75% range. AUM stood at INR 5,773 crores as of Dec'25, further strengthened by post-IPO net worth of INR 1,773 crores plus INR 710 crores primary raise. GNPA levels are marginally lower than Par-90 at 5.65% for hypothecation loans and 2.69% for mortgage loans. Par-30 stood at 7.54% for hypothecation and 3.5% for mortgage loans.

Management displayed strong confidence throughout the call, emphasizing their differentiated business model targeting unorganized micro-scale businesses (67 million enterprises) that are underserved by traditional lenders. MD Sanjay Sharma highlighted three key competitive moats: proprietary cluster-based underwriting methodology (since 2014), extensive branch presence for collections (527 branches), and technology optimization for low unit economics (typical loan size INR 1-2 lakhs). Management stressed that their customers are business owners (manufacturing, trading, dairy, services) not consumption borrowers or self-employed workers, making the portfolio resilient to macro shocks like tariffs and organized sector impacts. They emphasized improving trends across all metrics - collection efficiency, credit costs, and profitability - positioning the company to deliver on ambitious 3-year targets of 30% CAGR growth, 3.25-3.75% credit costs, 7-7.5% OpEx ratio, and 4-4.5% ROA with adequate leverage. Management was transparent about FY26 profit headwinds from mortgage team build-out (1,300+ people added) and elevated credit costs, but confident these are normalizing.

The primary challenge is elevated credit costs at 4.69%, still ~100bps above the company's normalized 3.25-3.75% target range, though declining for four consecutive quarters. Bihar represents 15.5% of AUM concentration with ongoing concerns around the new microfinance ordinance, though management noted their business loan customers show 99.3-99.4% collection efficiency versus stressed MFI consumption loans. Bihar's bucket-1 collection efficiency is lower at 40% compared to other states due to a newly instituted collection team (4 months old). Operating expense ratios remain elevated due to significant mortgage team investment (1,300+ people) against only INR 1,400 crores mortgage book, creating drag on profitability until scale is achieved. Approval rates have been tightened to 42-43% from historical 55%, limiting near-term growth in hypothecation loans. Mortgage business faces competitive supply in the market with multiple established players. The company's small average ticket size (INR 1-2 lakhs) creates unit economics challenges requiring significant technology investment. Geographic concentration risk exists with some states representing meaningful portions of the portfolio. NPA levels remain elevated with Par-90 at 5.95% for hypothecation loans versus pre-crisis levels.

Revenue Outlook: On track to achieve 29-30% AUM growth for full FY26, targeting consistent 30% CAGR over next 3 years

Margin Outlook: NIMs expected to stabilize despite mortgage mix increase, supported by declining reversals (25-40bps improvement potential) and lower incremental borrowing costs (10.31%); OpEx ratio to decline as mortgage business scales and operating leverage kicks in

Key Targets:

• 3-year vision: 30% consistent AUM CAGR
• Credit costs: 3.25-3.75% range (vs current 4.69%)
• OpEx ratio: 7-7.5%
• ROA: 4-4.5% with adequate leverage
• Mortgage portfolio target: 30% of total AUM (currently 21%)
• Q4 FY26: Quarterly annualized credit cost below 4%
• Approval rates to normalize back to 55% from current 42-43%

The Q&A session focused primarily on three themes: (1) growth trajectory and normalization timeline, with analysts probing when hypothecation loan growth will recover and how mortgage scaling will drive overall 30% CAGR targets; (2) asset quality improvement sustainability, with multiple questions on credit cost normalization path, collection efficiency trends, and state-wise performance especially Bihar; and (3) profitability outlook given moving parts of declining credit costs, mortgage mix impact on yields, and operating leverage from mortgage team investment. Analysts were particularly focused on Bihar's 15.5% AUM concentration and potential regulatory risk from the draft ordinance, though management confidently dismissed concerns citing their business loan model's resilience versus MFI consumption lending. Questions also explored the competitive dynamics in mortgage lending and end-use monitoring given the unorganized nature of customers. Management responded with detailed operational metrics, demonstrating strong command of business drivers and consistently emphasizing their differentiated positioning targeting unorganized micro-scale business owners rather than consumption borrowers or MFI-type customers. The tone was constructive with management providing transparent context on near-term profitability headwinds (mortgage team costs, elevated credit costs) while expressing high confidence in 3-year targets based on visible normalization trends in collection efficiency and credit costs. Overall, analysts appeared reassured by granular operational metrics and management's articulation of competitive moats, though some caution remained around elevated credit costs and Bihar concentration.