Belstar returned to profit as stress measures declined in H1

Belstar Microfinance Limited returned to a profit of Rs 144.1 crore in H1 FY 2027, compared with a Rs 159.6 crore loss in H1 FY 2026. Total expense fell Rs 340.1 crore to Rs 713.8 crore, while the Stage III asset ratio declined to 3.26% from 4.58% and loan AUM rose 2% to Rs 7,876.4 crore.

How did Belstar return to profit in H1 FY 2027?

Belstar returned to profit with profit after tax of Rs 144.1 crore in H1 FY 2027, against a Rs 159.6 crore loss after tax in H1 FY 2026. Profit before tax was Rs 191.9 crore, reversing a Rs 213.5 crore loss, as total revenue rose to Rs 905.8 crore from Rs 840.5 crore and total expense declined to Rs 713.8 crore from Rs 1,053.9 crore.

The reported reduction in total expense was larger than the increase in revenue. Expense decreased Rs 340.1 crore year on year and revenue increased Rs 65.3 crore, producing a Rs 405.4 crore shift in profit before tax. The presentation does not split total expense into operating and credit-cost components, although it reports lower expected credit loss, or ECL, provisions alongside the turnaround.

Belstar was profitable in both quarters of H1 FY 2027. Profit after tax increased to Rs 78 crore in Q2 FY 2027 from Rs 66.1 crore in Q1 FY 2027, while profit before tax rose to Rs 99.9 crore from Rs 92.1 crore. Revenue was Rs 453.6 crore in Q2 versus Rs 452.2 crore in Q1, and expense decreased to Rs 353.7 crore from Rs 360.1 crore.

What changed in Belstar's stressed loan portfolio?

Belstar's Stage III loan assets fell to Rs 236.2 crore in H1 FY 2027 from Rs 334.2 crore in H1 FY 2026. Stage III assets represented 3.26% of gross loan assets, down 1.32 percentage points from 4.58% a year earlier.

The decline occurred while reported loan assets increased to Rs 7,242.1 crore in H1 FY 2027 from Rs 6,852.9 crore in H1 FY 2026. Against FY 2026, Stage III loan assets were lower than Rs 402.2 crore and the Stage III ratio was below 5.54%, while loan assets exceeded the FY 2026 level of Rs 6,764.5 crore.

The direction was different within the half year. Stage III loan assets rose to Rs 236.2 crore in Q2 FY 2027 from Rs 200.8 crore in Q1 FY 2027, and the ratio increased to 3.26% from 2.85%. Both Q2 measures remained below the H1 FY 2026 amounts of Rs 334.2 crore and 4.58%.

How did Belstar's ECL provisions change?

Belstar's total ECL provision declined to Rs 355.3 crore in H1 FY 2027 from Rs 411.4 crore in H1 FY 2026. ECL provision as a proportion of gross loan assets reduced to 4.90% from 5.63%, while Stage III ECL provision decreased to Rs 231 crore from Rs 316.5 crore.

The year-on-year movements in provisions and stressed assets were aligned. Stage III loan assets declined Rs 98 crore and Stage III ECL provision declined Rs 85.5 crore. Total ECL provision was also below Rs 448.5 crore in FY 2026, when ECL provision was 6.18% of gross loan assets.

Provisions increased sequentially during H1 FY 2027. Total ECL provision rose to Rs 355.3 crore in Q2 from Rs 281.3 crore in Q1, and its ratio to gross loan assets increased to 4.90% from 3.99%. Stage III ECL provision similarly increased to Rs 231 crore from Rs 195.8 crore.

How did Belstar's loan book, network and capital change?

Belstar's loan AUM was Rs 7,876.4 crore in H1 FY 2027, compared with Rs 7,714.5 crore in H1 FY 2026, representing the 2% year-on-year growth stated in the presentation. AUM was marginally above Rs 7,842.2 crore in Q1 FY 2027 but remained below Rs 8,222.4 crore at FY 2026.

The network increased to 1,362 branches in H1 FY 2027 from 1,287 a year earlier and 1,312 at FY 2026. Employee numbers moved in the opposite direction, declining to 10,417 from 12,169 in H1 FY 2026 and 11,514 at FY 2026. Belstar reported operations across 21 states and union territories.

Capital adequacy was 25% in H1 FY 2027, compared with 22% in H1 FY 2026 and 24% in FY 2026. Shareholders' funds rose to Rs 1,938.8 crore from Rs 1,611.6 crore, while total outside liabilities declined to Rs 5,845.1 crore from Rs 6,363.6 crore. Total assets were Rs 7,783.8 crore, below Rs 7,975.2 crore a year earlier but above Rs 7,575.2 crore in Q1 FY 2027.

Conclusion

Belstar's H1 FY 2027 results combined a Rs 144.1 crore profit after a Rs 159.6 crore loss a year earlier with lower reported Stage III assets and ECL provisions. Revenue increased to Rs 905.8 crore, but the larger reported movement was the decline in total expense to Rs 713.8 crore from Rs 1,053.9 crore, while AUM was broadly stable at Rs 7,876.4 crore.

The unresolved matter for the next reporting period is whether the year-on-year improvement in asset quality can continue after the Q2 movement. Stage III loan assets rose from Rs 200.8 crore in Q1 FY 2027 to Rs 236.2 crore in Q2, while total ECL provision increased from Rs 281.3 crore to Rs 355.3 crore even as quarterly profit after tax rose from Rs 66.1 crore to Rs 78 crore.