Fedbank Financial Services Reports 24% Profit Growth in Q2 FY26, Focuses on Gold and LAP Business

Fedbank Financial Services Limited (Fedfina) has reported a 24.2% year-on-year increase in net profit for the second quarter of fiscal year 2026, reaching INR 80.2 crores. The company's performance reflects its strategic focus on gold loans and Loan Against Property (LAP) business, while actively reducing exposure to unsecured lending.

Key Financial Highlights

Metric	Value	Change
Net Profit	INR 80.2 crores	Up 24.2% year-on-year
Assets Under Management (AUM)	INR 16,136 crores	Growing 13.5% year-on-year
Gold Loan AUM	INR 6,731 crores	Up 36.4% year-on-year
Mortgage AUM	INR 8,796 crores	Increasing 22.6% year-on-year
Net Interest Income	-	10.9% year-on-year growth
Operating Profit	-	10.1% year-on-year increase

Business Strategy and Expansion

Fedfina has been actively expanding its gold loan business, opening 57 new gold loan branches in Q2 FY26. The company plans to open approximately 150 new gold branches in the entire fiscal year, with about 90 more expected in the next two quarters.

The company is also optimizing its branch network by co-locating small ticket LAP branches with gold loan branches. So far, 49 small ticket LAP branches have been merged with gold branches, with a target of 75-80 such consolidations for the year.

Focus on Secured Lending

Fedfina has significantly reduced its exposure to unsecured lending:

Completed assignment of business loan portfolio worth INR 115.6 crores
Reduced on-book exposure of unsecured lending to less than 1%
Sold deep delinquent NPAs worth INR 79.5 crores to an asset reconstruction company for INR 32.6 crores

Asset Quality and Provisioning

Credit costs stood at 0.9% for the quarter, including a 20 basis points impact from ECL refresh exercise
Provision Coverage Ratio (PCR) adjusted to 32% following the sale of deeper bucket NPAs

Funding and Cost of Borrowing

Secured External Commercial Borrowings (ECBs) totaling $150 million
Improved cost of borrowing by 37 basis points quarter-on-quarter to 8.19%
Incremental borrowing cost for Q2 continues to be below 8%

Management Commentary

Parvez Mulla, MD & CEO of Fedbank Financial Services, stated, "We are focused on conserving and allocating capital to businesses with high ROA and ROE, while moving towards a fully secured lending portfolio. Our twin-engine strategy of Gold and LAP businesses is showing positive results."

C.V. Ganesh, CFO, added, "We have been deleveraging and releasing capital to avail the gold loan opportunity. Our aim is to build capacity for better performance in FY27 and FY28."

Outlook

While the company maintains its credit cost guidance of 1% (±10 bps) for FY26, management expects improvements as collection infrastructure strengthens. Fedfina remains committed to its strategy of expanding gold loans and LAP businesses while optimizing costs and improving asset quality.

The company's focus on secured lending and branch expansion, particularly in the gold loan segment, positions it for potential growth in the coming quarters, subject to market conditions and successful execution of its strategies.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
-6.88%	-6.14%	-8.31%	+52.60%	+29.22%	+0.82%

Fedbank Financial Services (Fedfina), a retail-focused non-banking finance company (NBFC), has unveiled an ambitious growth strategy aimed at expanding its Assets Under Management (AUM) by over 25%. The company plans to achieve this growth primarily through its gold and mortgage-led business segments while simultaneously working to enhance its asset quality.

Strategic Focus on Gold and Mortgage Segments

Fedfina's strategy emphasizes two key areas:

Gold Loans: The company has shown significant progress in this segment, with gold loan AUM growing by 36.4% year-over-year to ₹6,731.00 crore, now contributing 41.7% to the total AUM.
Mortgage Loans: This segment, including medium and small-ticket Loan Against Property (LAP) and housing loans, saw a 22.6% year-over-year growth to ₹8,796.00 crore.

Financial Performance Highlights

Fedfina's recent quarterly results reflect the success of its focused strategy:

Metric	Amount (₹ crore)	YoY Growth
Net Interest Income	293.90	10.9%
Operating Profit	139.00	10.1%
Profit After Tax	80.20	24.2%
Total AUM	16,136.00	13.5%

Asset Quality and Operational Efficiency

The company has made strides in improving its asset quality:

Gross Stage III assets decreased to 1.9%
Net Stage III assets stood at 1.3%
Credit cost for the quarter was maintained at 0.9%

Technology-Driven Rural Market Penetration

Fedfina aims to maintain strong return on equity through technology-driven rural market penetration. This approach is evident in their digital initiatives:

Over 12 lakh app downloads
80%+ digital registrations
67%+ digital payments

Expansion and Reach

The company has expanded its physical presence:

Total branches increased to 699, spread across 17 states and union territories
57 new Gold Loan branches opened in the recent quarter

Future Outlook

Fedbank Financial Services' strategy of focusing on gold and mortgage-led business expansion, coupled with its efforts to improve asset quality and leverage technology for rural penetration, positions it well for sustained growth. The company's strong performance provides a solid foundation for achieving its ambitious AUM growth target of over 25%.

As Fedfina continues to execute its strategy, investors and stakeholders will be watching closely to see if the company can maintain its growth trajectory while managing risks in an evolving financial landscape.