1. At a Glance
Fedbank Financial, the NBFC offspring of Federal Bank, posted Q1 FY26 Revenue ₹520 Cr (+8.9% YoY) and PAT ₹75 Cr (+6.8% YoY). AUM jumped 19% YoY to ₹15,697 Cr, and asset quality remains disciplined (GNPA ~1.99%). Growth is there, but ROE at 9.4% still looks like it skipped gym.
2. Introduction
Think of Fedbank as the kid in school with a famous parent (Federal Bank) – expectations are sky high, but marks (ROE, ROCE) are just okay. The company flexes on low cost of borrowing, gold loan dominance, and MSME focus, yet struggles to match the big league NBFC profitability.
3. Business Model (WTF Do They Even Do?)
Retail-focused NBFC offering:
- Gold Loans – stable, high-yield.
- LAP & Home Loans – slower, margin-thin.
- Business Loans – riskier, higher spreads.
Core strength: diversified book and cheap funding (2nd lowest cost of borrowing in peer group FY24). Weakness: low ROE.
4. Financials Overview
Q1 FY26 Snapshot:
- Revenue: ₹520 Cr (+8.9% YoY)
- PAT: ₹75 Cr (+6.8% YoY, up from ₹70 Cr Jun-24)
- NII/Financing Profit: ₹112 Cr (margin 22%)
- EPS: ₹2.01
Verdict: Steady loan book growth, profitability still modest.
5. Valuation – What’s This Stock Worth?
At CMP ₹123, P/E 20, P/B 1.8, Fedbank trades cheaper than big NBFCs but with lower returns. Fair value range: ₹120–₹140. Market is pricing it like a safe gold loan, not a high-risk, high-reward bet.
6. What-If Scenarios
- If AUM growth sustains >20%: EPS crosses ₹8 in FY27, rerating to ₹150+.
- If NPAs rise >2.5%: Profit dips, valuation compresses.
- If cost of borrowing stays low: Margins widen, ROE improves.
- If competition bites: Growth stalls, stock drifts near ₹100.
7. What’s Cooking (SWOT Analysis)
Strengths: Low cost of funds, gold loan leadership, parentage support.
Weaknesses: Low ROE/ROCE, low interest coverage, no dividend.
Opportunities: MSME credit boom, cross-selling via Federal Bank channels.
Threats: Rate hikes, credit quality deterioration, fintech disruption.
8. Balance Sheet 💰
| ₹ Cr | FY23 | FY24 | FY25 |
|---|---|---|---|
| Assets | 9,071 | 11,138 | 13,250 |
| Net Worth | 1,356 | 2,260 | 2,548 |
| Borrowings | 7,270 | 8,340 | 10,437 |
| Liabilities | 445 | 537 | 265 |
Comment: Borrowings climb like your EMIs, but capital base is solid.
9. Cash Flow (FY19–FY25)
| ₹ Cr | FY23 | FY24 | FY25 |
|---|---|---|---|
| Ops | -1,474 | -776 | -978 |
| Investing | -130 | -100 | +329 |
| Financing | +1,632 | +967 | +1,187 |
| Net Cash | +28 | +92 | +539 |
Snark: Operating cash negative – classic NBFC story, funding growth with borrowings.
10. Ratios – Sexy or Stressy?
| Ratio | FY23 | FY24 | FY25 |
|---|---|---|---|
| ROE (%) | 15 | 14 | 9.4 |
| ROCE (%) | 11 | 10 | 9.8 |
| GNPA (%) | 2.34 | 1.99 | 1.99 |
| D/E | 5.4 | 3.7 | 4.1 |
ROE trending down – not a good sign for valuation multiples.
11. P&L Breakdown – Show Me the Money
| ₹ Cr | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 1,180 | 1,577 | 2,091 |
| PAT | 180 | 245 | 230 |
| EPS (₹) | 5.6 | 6.6 | 6.2 |
Profit dipped FY25 due to higher provisions and expenses.
12. Peer Comparison
| Company | P/E | ROE% | GNPA% | PAT Qtr Cr |
|---|---|---|---|---|
| Bajaj Finance | 31.4 | 19.2 | 1.0 | 4,700 |
| Muthoot Finance | 19.9 | 19.6 | 1.9 | 1,444 |
| Shriram Finance | 14.0 | 15.6 | 2.3 | 2,159 |
| Fedbank Financial | 20.0 | 9.4 | 1.99 | 75 |
Fedbank is the small cousin – cheaper P/E but much weaker ROE.
13. EduInvesting Verdict™
Fedbank Financial is growing steadily but profitability needs a booster. AUM growth is great, asset quality fine, and parent backing strong. Yet, low ROE, high leverage, and weak cash ops make this more of a “slow compounding gold loan” than a rocket.
A stable loan book, but not yet a market darling.
Written by EduInvesting Team | 28 July 2025
Tags: Fedbank Financial Services, Q1 FY26, ₹520 Cr Revenue, ₹75 Cr PAT, EduInvesting Premium
