Downgrades

We maintain our BUY recommendation on the stock.

GS3 improved ~1pp QoQ aided by an ARC transaction; credit costs elevated IndoStar Capital Finance (IndoStar) delivered a weak performance in 2QFY26, with muted disbursements and weak AUM growth as it continued to follow tightened underwriting norms and prioritized asset quality.

Five Star Business Finance’s (FIVESTAR) 2QFY26 PAT grew 7% YoY to INR2.86b (in line). PAT in 1HFY26 grew 6% YoY and we expect PAT in 2HFY26 to grow by 15% YoY.

SBI Cards (SBIC) has been focusing on credit cost improvement and the results are becoming visible now. However, this has also led to a calibrated credit growth and directionally lower revolver mix, impacting earnings.

HDBFS posted an overall weak Q2FY26, with AUM growth (13% YoY), asset quality (GS3 +25bps QoQ to 2.81%), and credit cost (2.7%) coming in worse than consensus’ and our estimates.

HDB Finance (HDBFIN)’s 2QFY26 PAT declined ~2% YoY to INR5.8b (in line). PAT in 1HFY26 declined ~2% YoY, and we expect 2HFY26 PAT to grow ~45% YoY. NII in 2QFY26 grew ~20% YoY to ~INR21.9b (in line). Other income rose ~14% YoY to ~INR6.6b (in line).

SBI Cards (SBICARD) is the second-largest player in the card segment in terms of cards-in-force (CIF), with a 19.1% market share in CIF and 16.6% share in total industry spends.

The stage-3 asset ratio in the gold loan portfolio declined to 2.58% in Q1FY26 from 3.98% a year earlier, supported by customer-led repayments aided by rising gold prices and flexible repayment options....

We expect yield compression to persist in the medium term as the company pivots toward secured lending to enhance competitiveness and attract high-value clients. Asset quality in the gold loan segment remains stable, supported by strong gold prices. However, risks in the nongold portfolioparticularly MFI, MSME, and vehicle financeremain elevated. Near-term credit cost pressures are likely to continue, though improved employee incentives may support recoveries and offset provisioning risks. As the company navigates its stabilization phase, improvements are expected to unfold gradually. Given the recent price hike and stretched...

IndoStar Capital Finance (IndoStar) delivered a weak performance in 1QFY26, with muted disbursements and weak AUM growth, impacted by tighter stringent underwriting and seasonal factors.

Manappuram Finance's gold loan portfolio grew by 22% YoY (vs 19% YoY FY25) backed by higher gold prices. However, MFI portfolio declined by 51% YoY (down 23% QoQ) due to strategy change. Thus, overall AUM de-grew by 1% YoY vs +2% YoY (FY25). We expect 13% CAGR (FY25-27E) AUM growth led by gold portfolio. MFI losses declined during the quarter due to decline in provisions. MFI asset quality improved with GNPA at 4.4% vs 8.5% QoQ led by lower slippages. Cons. NII declined by 10% YoY led by lower NIMs; PPoP declined by 33% YoY led by lower other income (down 77% YoY). Reported profit vs loss QoQ led by lower...

We revise our rating from BUY to HOLD

Net earnings were in line with estimates (rising 20.6% y-o-y and down 10.3% q-o-q) to Rs. 1,136 crore driven by growth in NII & other income and a lower opex run rate, however higher credit costs partially offset growth.

We maintain our BUY recommendation on the stock.

Cholamandalam Finance (Chola) sustains robust Q1FY26 performance with PAT growth at 21% YoY, RoA at 2.2% and RoE at 19%.

Cholamandalam Inv. & Finance (CIFC)’s 1QFY26 PAT grew ~21% YoY to INR11.4b (in line). Its 1Q NII grew ~24% YoY to ~INR31.8b (in line).

Five Star Business Finance (Five Star)’s management attributes the company’s asset quality deterioration, stage3 assets increasing to 2.5% vs. 1.8% QoQ and 30+ DPD rising to 11.3% vs. 9.65% QoQ, to higher stress in its core product (INR 0.3–0.5mn LAP) in the near term.

We maintain our BUY recommendation on the stock.

Five Star Business Finance’s (FIVESTAR) 1QFY26 PAT grew 6% YoY to INR2.7b (in line). 1QFY26 NII grew ~20% YoY to INR5.8b (in line), while PPoP rose ~14% YoY to INR4b (in line).

SFC AUM growth remain stable at 17% YoY led by 11% YoY growth in disbursements. Management maintained guidance for 15% YoY AUM growth for FY26E. We expect 16% CAGR (FY25-27) AUM growth. NIMs declined by 14bps QoQ led by higher public deposits raised during the quarter. However, NIMs are expected to improve with rate cut and lower liquidity. Asset quality remained stable with GS3 at 4.53% vs 4.55% led by better collections. NII grew by 10% YoY led by lower NIMs; PPoP grew by 9% YoY led by higher operating expenses (up 20% YoY). PAT grew by 9% YoY led by lower provisions (up 8% YoY). We have...