Fedfina Q4 FY26: Gold-led growth crosses 20,000 crore AUM as profitability improves

Fedbank Financial Services Limited, or Fedfina, ended Q4 FY26 with a visible jump in scale and earnings. Assets under management rose 27.5% year-on-year to 20,153 crore, helped by strong momentum in the gold loan franchise. Profit after tax for the quarter increased 40.3% year-on-year to 100.5 crore, taking full-year PAT to 343.6 crore, up 52.6%.

The company framed FY26 as a year of tighter capital allocation and a decisive shift toward secured lending. That stance showed up in the numbers: secured AUM stood at 98.9% at March 31, 2026, while credit cost fell to 0.8% of average total assets for the year, compared with 1.7% in FY25.

Twin-engine model, but gold takes the lead

Fedfina’s portfolio is positioned around two collateral-backed products: gold loans and mortgages (loan against property and housing loans). In FY26, gold loans became the largest driver of growth and now account for just over half of total AUM.

Gold loan AUM grew 76.0% year-on-year to 10,352 crore, contributing 51.4% of total AUM. Management highlighted that growth was supported not only by gold prices but also by 12.6 tons of gold tonnage, up 12% year-on-year. Mortgage AUM grew 16.1% year-on-year to 9,362 crore.

Disbursements for FY26 rose 67.2% to 31,410 crore, driven by gold loan disbursements of 28,326 crore. Non-gold disbursements declined year-on-year, reflecting a more cautious stance in certain segments and the impact of the business loan sell-down.

Branch expansion and co-location drive distribution push

A large part of the gold loan growth was linked to distribution expansion. Fedfina ended FY26 with 757 branches across 17 states and union territories. It commissioned 34 new branches in Q4 and 148 during the year, while also closing 15 branches. The company also accelerated branch co-location, shifting small ticket LAP operations into gold branch premises. Co-located branches reached 70 for the year.

Gold loan productivity improved despite the expansion. Gold AUM per branch increased to 16.5 crore in FY26 from 12.1 crore in FY25. Management also pointed to doorstep gold loans as a growth lever, with doorstep gold loan AUM rising to 1,730 crore.

Regionally, the company continued to reduce concentration risk. The share of AUM contributed by the top five states fell to 75.1% in FY26 from 76.0% in FY25. On gold loans, the South’s share declined steadily over the years, while West and North gained share. A similar shift was visible in mortgages, where the North increased to 30% of AUM by FY26.

Capital efficiency, funding mix, and a deliberate step away from unsecured loans

Management repeatedly positioned direct assignments and sell-downs as capital allocation tools rather than a recurring earnings driver. This was consistent with the sharp fall in net gain on direct assignment, which declined to 7.4 crore in FY26 from 65.9 crore in FY25.

The company executed 100% assignment of a business loan portfolio of 886 crore during H1 FY26 and derecognized it from AUM. Management said this improved capital efficiency and ring-fenced the company from stress in the unsecured lending market.

Off-book exposure increased to 28.0% of total AUM at Q4 FY26, up from 25.1% at Q4 FY25. Funding sources were diversified across term loans (50%), direct assignments (14%), net worth (13%), NCDs (7%), CPs (6%), and CLM (11%). The daily average cost of borrowing declined to 7.83% in Q4 FY26 from 8.72% in Q4 FY25.

The company also raised 450 crore of subordinated debt in Q4 FY26. CRAR improved to 22.4% at March 2026 from 20.5% in Q3 FY26.

Management flagged that borrowing costs hardened after February and hedge rates on foreign currency borrowings rose materially. The CFO said the company increased liquidity buffers in Q4 as a hedge against near-term volatility.

Asset quality: gold remains clean; mortgages still the key watch area

At the entity level, Fedfina reported improving delinquencies in Q4 FY26: 1+ DPD declined to 6.0% from 7.1% in Q3 FY26, and 30+ DPD declined to 3.7% from 4.5%. Gross stage III improved to 1.9% from 2.1% in Q3 FY26.

However, segment data shows mortgages are still the main driver of stressed assets. On an AUF basis, mortgage gross stage III was 239.4 crore with gross stage III at 3.8% in Q4 FY26, while gold loan gross stage III was 16.9 crore with gross stage III at 0.2%. The company’s stage III PCR stood at 32.3% in Q4 FY26, lower than 40.0% in Q4 FY25.

Management linked the improved credit cost to collections strengthening, verticalization, and a shift from agency-led to in-house collections. The presentation also showed collections team strength increasing to 1.8x in FY26 and a reduction in agency allocation to 0.4x.

What management said about FY27

In Q&A, management stated the company will continue to operate as a 20% to 25% AUM growth company. For gold loans, management said internal budgeting focuses first on tonnage growth of 10% to 15%, with gold price movement treated as a bonus. It also stated that even with flattish gold prices, gold AUM could still grow around 20% to 22%.

Management also guided toward a further improvement in ROA by 20 to 30 bps in FY27 relative to FY26, driven by a mix of lower operating costs and credit cost improvements, while keeping other parts of the ROA tree broadly stable.

The mortgage business, especially small ticket LAP, was positioned as a turnaround-in-progress rather than an immediate growth engine. Management said internal issues in small ticket LAP are behind the company, but it also indicated it would balance growth with quality, using medium ticket LAP as a stabilizer when needed.

Takeaways

Fedfina’s FY26 performance shows a clear pivot toward secured growth, driven by a rapidly scaling gold loan business and supported by a broad branch expansion program. Profitability improved sharply even as the company dialed down direct assignment gains, which indicates stronger underlying earnings quality.

The key variables to watch from here are mortgage asset quality normalization, the ability to sustain gold growth without meaningful yield pressure, and the funding cost environment given management’s caution on rates and hedging costs. If credit costs remain contained and operating leverage continues to improve, the company’s stated aim of a higher ROA trajectory in FY27 becomes more measurable.