Paisalo Digital's Q2 FY26: Scaling Growth with Tech and Inclusion

Paisalo Digital Limited, a prominent player in India's financial services sector, has delivered a robust performance in the second quarter and first half of Financial Year 2026, showcasing significant growth across key financial and operational metrics. The company's strategic focus on financial inclusion, particularly in underserved rural and semi-urban areas, continues to drive its expansion. For Q2 FY26, Paisalo reported a record Assets Under Management (AUM) of INR 5,449.4 crore, marking a substantial 20% year-on-year (YoY) increase. Disbursements also reached an all-time high of INR 1,102.5 crore, surging by 41% YoY, reflecting strong lending traction. Total Income for the quarter stood at INR 224 crore, up 20% YoY, while Profit After Tax (PAT) reached INR 51.5 crore, demonstrating continued operational resilience.

The company's growth is underpinned by a multi-pronged strategy that combines an extensive physical distribution network with advanced technological integration. Paisalo's customer franchise expanded significantly to approximately 13 million lives, with an addition of about 1.8 million customers during the quarter. This expansion is supported by 4,380 touchpoints across 22 states, comprising 402 branches, 2,585 distribution points, and 1,393 business correspondent (BC) points. The BC network, in partnership with leading banks like State Bank of India and Bank of India, serves as a critical channel for last-mile financial service delivery, facilitating the opening of thousands of small savings bank accounts and cross-selling various financial products.

Strategic Pillars and Technological Edge

Paisalo's strategic framework is built on several pillars, including disruption in MSME and small-ticket income generation loans, high-tech and high-touch distribution, advanced underwriting and technology, scaling co-lending, and professional management. A significant technological advancement this quarter was the deployment of a Gen-AI-based calling system. This intelligent, automated solution streamlines loan recovery and improves borrower communication by automating approximately 350,000 calls daily for EMI reminders and collection efforts. This AI-based system supports multiple regional Indian languages and adheres to stringent security and compliance measures, reflecting Paisalo's commitment to operational excellence and customer satisfaction.

The company is also actively expanding its product portfolio, with pilot programs underway for loans against property, tractor finance, medical and equipment finance, and broader equipment lending. These initiatives aim to diversify the AUM mix beyond traditional strongholds in Northern states, transforming Paisalo into a pan-India player. Regions like Maharashtra and Rajasthan now contribute 18% and 14% respectively to the portfolio, reducing geographic concentration risk and enhancing overall resilience.

Financial Health and Risk Management

Paisalo's financial health remains robust, supported by a strong capital base and disciplined risk management. The company's capital adequacy ratio (CAR) stood at a healthy 38.2%, with Tier 1 capital at 30.3% and Tier 2 at 8.0%, well above regulatory requirements. The debt-to-equity ratio was comfortable at 2.24x, providing ample capacity for future growth while maintaining financial stability. Furthermore, the conversion of USD 4 million from its USD 50 million maiden FCCB issuance in September 2025 has further strengthened its paid-up capital, expanding it from INR 90.21 crore to INR 90.95 crore. Promoters have also continuously increased their stake, reaching 41.2% in H1 FY26, signaling strong long-term commitment.

Asset quality remained well-contained, with Gross NPA at 0.81% and Net NPA at 0.65%, reflecting effective credit assessment and collection processes. While collection efficiency saw a slight dip to 98.4% due to seasonal weather patterns, management expects normalization in the coming quarters. The company's proprietary CCC (Credit, Character, Credential) model, supported by AI and machine learning, plays a crucial role in assessing borrower risk profiles and ensuring robust underwriting.

Commitment to Sustainability and Future Outlook

Paisalo Digital has taken a significant step towards environmental sustainability by installing an energy-efficient liquid-cooled server in its Mumbai office. This initiative is projected to avoid approximately 55.8 tonnes of CO2 emissions annually and save nearly 79,716 kWh of electricity, aligning with United Nations Sustainable Development Goals. This move underscores the company's commitment to integrating sustainable practices while enhancing data efficiency and reducing its carbon footprint.

Management has provided positive guidance, aiming to maintain a 20% CAGR in AUM, targeting a doubling of AUM in the next three years. The Net Interest Margin is guided at 6.5% for the full year, and credit costs are expected to remain below 1-2% in the long term. Paisalo's disciplined growth, resilient profitability, and strategic investments in technology and network expansion position it well to capitalize on emerging opportunities in India's underserved credit market, driving inclusive and responsible growth for its customers, investors, and stakeholders.