Highest Upside

Riding the Gold Loan Surge

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.

MAS Financial Services (MASFIN)’s 1QFY26 PAT grew ~19% YoY to INR839m (in line). Fee income rose ~55% YoY to ~INR300m. Net total income was up 36% YoY to INR2.4b (in line), while opex at INR827m grew ~46% YoY (8% higher than MOFSLe).

We maintain our BUY recommendation on the stock.

Northern Arc’s ?13,351 crore loan book is strategically diversified across MSME (?2,687 crore, 20%), Consumer Finance (?3,502 crore, 26%), Rural Finance (?953 crore, 7%), and Intermediate Retail (?6,209 crore, 47%).

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).

We maintain our BUY recommendation on the stock.

Quarterly Update Q1FY26

We initiate coverage on HDB Financial Services (HDBFS) with BUY and Jun-26E TP of Rs 900 (+22% upside), on FY27E P/B of 3.0x. Our positive view is due to, HDBFS being a highly diversified (geographically and product-wise), extremely granular (top 20 accounts constitute ~0.34% of AUM), and large-scale lending franchise with over 19mn customers.

Total expenses surged 228.3% YoY in Q1FY26, mainly due to finance costs reaching Rs. 99cr, up from zero in Q1FY25, after Jio Credit Ltd accessed external debt markets to support its operational growth. Employee benefit expenses and other expenses grew 63.6% and 144.8%,...

HDB Financial Services (HDB) is the seventh-largest diversified, retail-focused NBFC in India with an AUM of ~INR1.1t as of Jun’25.

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.

SUF AUM growth remains stable at 17% YoY vs 17% YoY (FY25) led by lower disbursements. Disbursements grew by 6% YoY (up 6% QoQ) during Q1FY26. Asset quality deteriorated however, continues to remain best-in-class; collections stood at 91%. NIMs (calculated) have improved (up 46bps YoY) led by increase in yields which resulted in strong NII growth (up 28% YoY). PPoP grew by 51% YoY led by higher non-interest income (up 65% YoY). PAT grew by 39% YoY led by higher provisions (up 114% YoY). Thus, RoA improved to 2.9% vs 2.85% QoQ. We have largely retained the estimates and upgraded the stock to BUY rating with TP of Rs.5,530...

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.

BAF’s AUM is expected to grow at 25% (CAGR) for FY25-FY27, driven by favorable government reforms, such as the reduction in GST on auto and consumer durables, which is expected to drive demand.

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.

SBFC Finance’s (SBFC) Q1FY26 financial performance stands out with RoE improving to 13.5% with RoA stable at 4.5% despite a challenging operating environment.

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).

Cholamandalam Inv. & Finance (CIFC)’s 2QFY26 PAT grew ~20% YoY to INR11.5b (in line). PAT grew ~20% YoY in 1HFY26, and we expect its PAT to grow ~21% YoY in 2H.