CSL Finance: Navigating Growth with Strategic Precision in Q2 FY26

CSL Finance Limited, a prominent Non-Banking Finance Company (NBFC) listed on the NSE and BSE, has demonstrated a robust performance in the second quarter of Fiscal Year 2026 (Q2 FY26). The company, known for its secured loan products catering to Small and Medium-Sized Enterprises (SMEs) and real estate corporates, reported significant growth and strategic advancements. This quarter's results underscore the company's resilience and its focused approach towards sustainable expansion and asset quality management.

The company's Assets Under Management (AUM) reached an impressive ₹1,397 crore as of September 30, 2025, marking a healthy 29% year-on-year growth and an 8% sequential increase over the previous quarter. This growth is particularly noteworthy as it reflects a more balanced contribution from both the SME Retail and Wholesale segments, indicating a broadening base for future expansion. While disbursements remained stable year-on-year, SME Retail disbursements showed a remarkable upturn, growing by 93% YoY and 61% sequentially, albeit from a lower base. This success is attributed to corrective measures implemented in the SME retail segment, including refined credit policies, optimized product portfolios, and strengthened underwriting processes.

Financial Highlights and Asset Quality

CSL Finance's financial performance in Q2 FY26 showcased strong profitability. Net Interest Income (NII) stood at ₹40.9 crore, registering a 10% YoY and 2% QoQ growth. Profit After Tax (PAT) surged to ₹24.5 crore, an increase of 37% YoY and 15% QoQ. This robust PAT growth was partly influenced by deferred tax adjustments, with Profit Before Tax (PBT) providing a clearer view of underlying performance at ₹28.85 crore, up 17% YoY and 5% sequentially.

Asset quality also saw a steady improvement. Gross Non-Performing Assets (NPA) decreased to 0.51% from 0.56% in Q1 FY26 and 0.54% in Q2 FY25. Similarly, Net NPA improved to 0.39% from 0.42% in Q1 FY26 and 0.32% in Q2 FY25. The company's Provision Coverage Ratio also improved to 229.06% in Q2 FY26 from 201.40% in Q1 FY26. Management expressed confidence that most of the write-off cycle would be behind them by the end of FY26, reinforced by the absence of significant delinquencies in the fresh SME retail book disbursed over the past 12 months. The company's 100% secured loan book across both wholesale and retail segments provides a strong buffer against credit risk and supports good recovery rates.

Below is a financial summary table for CSL Finance Limited:

Operational and Strategic Initiatives

CSL Finance continued to strengthen its operational and funding base. The company added two new branches in Q2 and rolled out several spoke locations, many of which are slated to become full-fledged branches, expanding its hub-and-spoke model. This strategy aims for efficient scaling, cost management, and higher success rates. The lender base expanded with the onboarding of City Union Bank and Paul Merchants, bringing the total to 34 lenders, ensuring a diversified and stable funding profile.

Liquidity remains strong, with ₹111.5 crore in balance sheet liquidity and ₹35 crore in undrawn credit lines. The company has also started to benefit from recent rate cuts, with the cost of fresh borrowings reducing by 60-70 basis points, expected to reflect in the weighted average cost of capital. Targeted hiring at the mid-management level has strengthened credit, operations, and business teams, and employee attrition has been brought under control.

Technological advancements are a core focus, with enhancements in customer onboarding, loan origination via API integrations, and strengthened data analytics capabilities. The Loan Origination System (LOS) has been revamped for SME Retail and is being upgraded for Wholesale, alongside improved collection systems through dedicated mobility applications. These initiatives aim to reduce Turnaround Time (TAT) to 24-48 hours, improve fraud control, and enhance credit decisioning.

Outlook and Management Commentary

Management maintains a cautiously optimistic outlook for the remainder of FY26. The focus remains on disciplined growth, particularly within the SME retail segment, while upholding robust asset quality and liquidity. The company aims to achieve an AUM target of ₹1,500-1,600 crore by year-end. By FY27, the company targets 45% of its AUM from the SME segment, supported by an expanded branch network of around 60 branches, each achieving ₹50 lakh disbursal by Q1 FY27. The company also expects its Net Interest Margins (NIMs) to improve as borrowing costs reduce.

CSL Finance's credit rating was reaffirmed as A- | Stable by Acuite Ratings & Research, an upgrade from the previous BBB+ | Stable. This improved rating enhances the company's ability to access capital on more competitive terms, supporting AUM growth and overall profitability. The company is actively onboarding additional PSU lenders to further optimize borrowing costs and secure larger ticket sizes.

In conclusion, CSL Finance Limited is strategically positioning itself for sustained growth, leveraging its strong asset quality, robust liquidity, and technological advancements. The company's focus on the SME Retail segment, coupled with its diversified funding and proactive risk management, underpins its confidence in achieving its financial and operational targets.