01 — At a Glance
The NBFC That Lost Its Way. Then Started Climbing.
- CMP₹198
- Book Value Per Share₹247
- P/B Ratio0.83x
- Q3 Revenue (₹ Mn)346.39
- Q3 PAT (₹ Mn)8.30
- AUM (Total Portfolio)₹7,692 Cr
- Q3 Disbursements₹1,117 Cr
- Gross NPA4.06%
- Net NPA1.76%
- Debt / Equity1.43x
The Auditor’s Hot Take: Indostar Capital reported ₹8.3 crore PAT in Q3 FY26 (vs ₹10.5 Cr in Q2). Revenue ₹346 million. ROCE of 6.79% — lower than a government savings account. Stock down 34% in one year. Yet every metric that matters for a turnaround is improving. Profitability is *supposed* to be temporary pain. The question: is management walking the walk, or just talking the turnaround?
02 — Introduction
Who Is Indostar, And Why Is It Still Here?
Founded in 2009, incorporated as a systemically important NBFC in 2016, Indostar Capital Finance is basically the “second chances NBFC.” Brookfield (global alternative asset manager, NYSE listed, $750bn+ AUM) bought in with 56% stake in 2020. The company focused on SMEs, housing finance, and wholesale lending for a decade. Then housing crashed. SME portfolio went sour. Wholesale book became a graveyard. By 2023-24, the stock had tanked 60%. The auditor was seeing red.
Management’s response: “We are exiting everything that’s broken and pivoting to used commercial vehicle financing.” Used CVs are unsexy, repetitive, lower-margin work. But they have unit economics. And they scale. Management started tightening credit from Q1 FY26, admitted it would hurt volumes short-term, and promised that by Q3, you’d see the benefits.
Q3 arrives, and lo and behold — disbursements jump 20% QoQ to ₹1,117 crore. Non-starter rates (early delinquencies on new loans) fell from 5.2% to 2.08%. CIBIL mix improved from 82% to 89%. Legacy book still bleeding (Gross NPA 4.06%), but trends are reversing. The stock hasn’t rallied. But every single thing management said would happen, happened.
The question isn’t whether Indostar is profitable. It’s whether it’s becoming *competent*. Let’s find out.
Concall Quote (Feb 2026): “Delinquency levels in the calendar year 2025 cohort are nearly 50% lower than earlier cohorts (like-for-like).” Management presented data showing non-starter improvement from 5.2% to 2.08%. This is the kind of specificity that gets auditors to listen.
03 — Business Model: What the Hell Do They Do?
Lending To CV Operators. In Rural India. At 17% Yields.
Indostar does three things now: (1) Vehicle finance (~90% of portfolio) — primarily used commercial vehicles at ₹8.2 lakh average ticket; (2) Micro LAP (micro land/property secured loans) for semi-urban/rural borrowers; (3) slowly exiting housing finance and everything else that’s not “scalable.” The used CV business has fundamentals. CV parc in India is 30+ million units. Average life is 8-10 years. Operators regularly refinance. Indostar owns 448 branches across 23 states and controls distribution to the actual mechanics and owners.
The yields on vehicle finance? Management disclosed 17.25% all-in on a blended basis (down from 18% due to prime customer entry). Cost of funds is 10.3%. Net spread after opex: roughly 3-4% on AUM. It’s not sexy. But it’s real. And it compounds.
Micro LAP is the wild card. Target: semi-urban/rural, ₹6-7 lakh tickets, tenure up to 10 years, 99% on residential property, 95% self-occupied. LTV always below 40%. By Dec 2025: ₹128 crore AUM, 2,215 customers, only 6 in 1+ DPD. Management’s plan: double AUM in FY27. That’s ambitious but not insane — they’re already proving the model works.
Vehicle Finance~90%of AUM
Avg Ticket (CV)₹8.2Lper borrower
Yield Target17%all-in
Micro LAP Surprise: Only 6 customers in 1+ DPD out of 2,215. Management says 100% digital onboarding, 100% digital collections, no cash handling. For a ₹128 crore pilot, this kind of early-stage perfection is either (a) real operational discipline, or (b) too small to matter. By FY27, we’ll know which.
💬 Have you borrowed from an NBFC for vehicle finance? What’s your experience with their repayment flexibility vs banks?
04 — Financials: The Painful Truth
Q3 FY26 — Where Revenue Rises But Profits Collapse
Result type: Quarterly Results (Q3 FY26) | Latest Quarter EPS: ₹0.51 | 9M FY26 PAT: ₹28.8 Cr
| Metric (₹ Mn) |
Q3 FY26
Dec 2025 |
Q3 FY25
Dec 2024 |
Q2 FY26
Sep 2025 |
YoY % |
QoQ % |
| Revenue (NII+OI) | 346.39 | 373.23 | 356.55 | -7.2% | -2.8% |
| Financing Profit | 15.78 | 18.33 | 17.88 | -13.9% | -11.8% |
| Financing Margin % | 4.56% | 4.91% | 5.01% | -35 bps | -45 bps |
| Operating Expenses | 193.48 | 161.92 | 172.00 | +19.5% | +12.5% |
| PAT (₹ Mn) | 8.30 | 27.72 | 10.49 | -70.1% | -20.9% |
| EPS (₹) | 0.51 | 2.04 | 0.77 | -75.0% | -33.8% |
The Earnings Shock: PAT crashed 70% YoY. EPS fell from ₹2.04 to ₹0.51. Opex jumped 19.5% YoY (includes ₹4.8 crore one-off from wage code change). Financing margin compressed 35 bps YoY. This looks like death. Except — disbursements are up 20% QoQ, new cohort delinquency is down 50%, and management hired a COO who managed ₹22,000+ crore. The market is pricing in permanent decline. Management is pricing in temporary pain for structural gain.
05 — Valuation: Fair Value Range
When The Assets Are Worth More Than The Stock
