/** Title: CSL Finance FY26: Wholesale strength offsets SME caution */

CSL Finance FY26: Wholesale strength offsets SME caution

CSL Finance ended FY26 with steady growth in scale and profits, even as its SME Retail business went through a slower patch. Assets Under Management (AUM) stood at INR 1,448 crore as of March 31, 2026, up 21% year-on-year. The on-book loan book was INR 1,395 crore, also up 21%.

For the full year, total income rose to INR 257.02 crore, up 19% over FY25, while net interest income (NII) increased 15% to INR 168 crore. Profit after tax (PAT) came in at INR 86.11 crore, up 19%. Return on equity (ROE) improved to 14.81% in FY26 from 13.31% in FY25.

Quarter four carried a similar pattern. NII grew strongly, but PAT was flatter due to higher ECL provisions and write-offs. Q4FY26 NII was INR 45.4 crore, up 21% year-on-year and 10% sequentially. Q4FY26 PAT was INR 19.4 crore, up 2% year-on-year but down 7% versus Q3FY26.

FY26 performance in one view

The year’s results reflect a company that continued to grow, but with a visible internal rotation. Wholesale lending remained the primary growth driver, while SME Retail disbursements slowed in the second half because of tighter risk posture and a tougher operating environment.

CSL reported disbursements of INR 1,255 crore in FY26, up 12% over FY25. Collection efficiency was maintained at 98% across quarters, which management highlighted as a key indicator of portfolio stability.

AUM mix moved further in favour of Wholesale. The company ended Q4FY26 with AUM mix of 31% SME Retail and 69% Wholesale, compared with 34% and 66% respectively in FY25.

Business mix: a granular book, but wholesale-led growth

CSL’s loan book is presented as fully secured. It operates across SME Retail, SME mid-sized LAP, and multiple wholesale products, largely focused on real estate funding.

The company provided an AUM split by product in the presentation, which helps explain the wholesale tilt:

Management described wholesale as a lumpy business quarter to quarter, and reiterated that it is better tracked annually. In Q4, disbursements were down 16% sequentially to INR 301 crore from INR 357 crore in Q3, which management attributed to normal variability linked to collections and prepayments.

On SME Retail, management’s tone was cautious. It cited over-leveraged borrower profiles, stagnant income growth across the MSME ecosystem, and rising competitive intensity. The company also said that lenders previously focused on microfinance have moved aggressively into secured SME lending, especially under the INR 10 lakh ticket segment.

CSL has responded by shifting its focus towards better-quality borrowers and collateral, within the INR 7 to 50 lakh product band. It also noted that it had pivoted away from certain larger SME tickets that were being done 15 to 18 months earlier.

Operationally, the branch network ended FY26 at 44 branches across 7 states, with a hub-and-spoke expansion approach. The company also indicated it has been reshuffling and relocating branches to improve efficiency, keeping net branch additions limited.

Asset quality: higher NPAs, but management expects stabilisation

Asset quality metrics worsened in FY26. GNPA increased to 1.10% in Q4FY26 from 0.46% in Q4FY25. NNPA rose to 0.81% from 0.34%. Provision coverage ratio declined as well, reported at about 122% in Q4FY26 versus 256% in Q4FY25.

Management attributed higher impairments in the second half partly to lower NPA resolutions. It also pointed to an RBI-driven change in standard provisioning for project financing. The presentation notes that standard provisioning on project financing was revised to an average of 0.98% from 0.80% earlier.

In the concall, management emphasised two mitigants. First, it stated that over two-thirds of the book is SARFAESI compliant, which should enable faster recoveries through legal processes. Second, it said it is not seeing any major delinquencies in the SME Retail book disbursed over the last 12 months, supporting its confidence in fresh underwriting quality.

It also discussed a new ECL policy approved by the Board, describing the intent to make provisioning more objective, especially in the retail segment. Management noted that if the new model were applied, provisioning would have been lower than what the company currently carries, but it chose to remain conservative.

Funding, liquidity and the push into co-lending

CSL’s balance sheet remains conservatively leveraged. Debt to equity was 1.39x in Q4FY26, and the company reported liquidity of INR 110.4 crore as of March 31, 2026, along with positive ALM across buckets.

The credit rating was reaffirmed as A- stable by Acuite as of March 31, 2026. Management linked the rating improvement to better access to capital on competitive terms.

The lender base increased to 36, and the company added Bank of Baroda as a new PSU lender during Q4. It also concluded a term sheet for an INR 30 crore NCD issue, which management said helps diversify funding sources and improve access to debt capital markets.

A strategic theme emerging from the quarter is the push to build off-book wholesale AUM via joint-lending or co-lending structures. Management said it closed a few such deals in Q4 and expects more activity in FY27, supporting fee-based income. It clarified that the model is co-lending rather than down-sell, and CSL retains a meaningful stake, typically using co-lenders for larger requirements above about INR 30 to 40 crore.

FY27 lens: disciplined growth with caution on SME

Management’s AUM growth guidance for the next year was 15% to 25%, similar to the pace achieved in recent years. It expects the wholesale segment to remain strong and be a key growth driver.

On SME Retail, the company remained cautiously optimistic, but near-term commentary suggested a consolidation phase. Management indicated that for the next 2 to 3 months the focus is on improving productivity in existing branches and rationalising teams and operating costs, with branch expansion activity resuming from Q3.

In response to investor questions, management also stated it does not expect gross and net NPA ratios to increase in the next financial year, and that credit cost, which has been around 0.5%, should stabilise around that level.

Takeaways

CSL Finance delivered a strong FY26 on headline growth, with total income up 19% and PAT up 19%, supported mainly by a robust wholesale franchise and steady collections. The company’s capitalisation and liquidity profile remains conservative, with high capital adequacy and low leverage.

The key watch item is SME Retail, where management acknowledged slower growth and a tougher environment. FY27 strategy appears to balance these realities: lean into wholesale and co-lending to sustain growth and fees, while tightening SME execution and improving branch productivity before restarting expansion.