Paisalo Digital Q4 FY2026: Record profit, improving spreads, and an AI-led scale-up

Paisalo Digital ended Q4 FY2026 with its highest-ever quarterly profit, while expanding distribution and doubling down on an AI-led operating model. Assets under management (AUM) rose to Rs 61,009 million, up 17% year on year, and quarterly disbursements were Rs 13,440 million. Total income increased 35% year on year to Rs 2,609 million, while profit after tax (PAT) jumped 56% to Rs 722 million.

The quarter’s core story was a combination of scale and improving unit economics. Net interest income (NII) rose 61% year on year to Rs 1,733 million, supported by a modest uptick in portfolio yield to 17.04% and a decline in borrowing cost to 10.22%. The company also reported stable-to-improving asset quality with gross NPA at 0.76% and net NPA at 0.61% as of Q4 FY26, alongside collection efficiency of 98.5%.

Financial performance: income growth and margin support

Paisalo’s Q4 FY26 income growth was largely driven by interest income expansion as the book scaled. Interest income for the quarter was Rs 2,526 million versus Rs 1,821 million in Q4 FY25. Interest expense was largely flat year on year at Rs 876 million, which helped NII expand meaningfully.

Operating expenses rose to Rs 689 million in Q4 FY26 from Rs 447 million in Q4 FY25. Despite the increase, pre-provision operating profit (PPOP) grew 52% year on year to Rs 961 million. Provisions were Rs 71 million in Q4 FY26 versus Rs 1 million in Q4 FY25, leading to profit before tax of Rs 970 million and PAT of Rs 722 million.

For FY2026, total income was Rs 9,437 million and PAT was Rs 2,372 million. The company reported FY2026 NIM of 6.8% and ROA of 3.8%, with ROE at 13.2%.

Distribution and product mix: scaling reach across Bharat

A key operational lever in FY26 was distribution expansion. In Q4 FY26, Paisalo added 427 new touchpoints, taking the network to 5,299 touchpoints across 22 states. The mix included 422 branches, 3,381 distribution points, and 1,496 business correspondents (BCs). The company stated that the customer franchise reached about 16 million during the quarter.

On portfolio mix, the investor presentation disclosed an AUM composition of 71% MSME and SME loans and 29% small income generation loans as of FY2026. FY26 AUM by end-use segments included food and hospitality at 24%, agri and allied agri at 14%, street vendors at 14%, heavy industries at 11%, technology at 8%, health and education at 5%, textiles at 4%, vehicle at 3%, and the balance in other segments.

Geographically, the company disclosed a state-wise portfolio breakup with Delhi at 28.0%, Maharashtra at 21.7%, Haryana at 14.9%, Uttar Pradesh at 14.1%, Rajasthan at 13.1%, and others at 8.1%.

AI as an operating backbone: early signs of operating leverage

Paisalo’s strategic messaging in both the presentation and the earnings call positioned AI as central to the next phase of scaling. The company described AI deployment across customer acquisition, underwriting, servicing, collections, and risk monitoring.

In Q4 FY26, the company cited operational KPIs linked to automation. It stated that around 160,000 applications were processed per quarter via AI-enabled onboarding, 125,000 servicing cases and 225,000 debt-management cases were handled through AI pipelines, and about 250,000 quality checks were automated. It also highlighted front-end digitisation such as facial recognition and OCR scans at branches.

A key operating leverage indicator highlighted was headcount reduction. The company stated that headcount was down 3% in FY26 despite network expansion and AUM growth, which it attributed to technology and AI-led efficiencies.

Funding, co-lending, and liability diversification

On liabilities, Paisalo reported cost of borrowing of 10.2% for FY26 and highlighted a diversified borrowing mix dominated by banks and financial institutions, along with NCDs, FCCBs and commercial paper. A major milestone disclosed was the company’s maiden ECB issuance of USD 15 million in Q4 FY26.

The company also highlighted dual credit ratings of AA stable/A1+. It reported a debt-to-equity ratio of 2.43x and capital adequacy of 35.8% at Q4 FY26.

Co-lending remains part of the stated strategy. The company described co-lending as an 80:20 participation model with no FLDG and pari-passu sharing of credit costs. On the earnings call, management said it had completed its compliance requirements for two co-lending methods with SBI, expects one method to go live within the quarter, and is awaiting bank-side confirmation on the second.

What management guided and what to track

Management reiterated its three-year strategic roadmap with the stated goal of doubling AUM, income, and PAT over three years while preserving best-in-class asset quality. On margin outlook, management stated it targets maintaining around 6.5% NIM for the upcoming financial year, despite the current spread of 6.83% reported for Q4.

From an investor tracking perspective, the key swing factors remain execution of the AI-led productivity agenda, the pace and quality of expansion into new segments via partnerships, and continued progress on funding diversification and co-lending activation. The company also flagged it is exploring inorganic growth opportunities.

Overall, Q4 FY2026 showed strong profitability, improving funding cost, and stable asset quality, while the strategy narrative is increasingly centered on AI-led operating leverage and broad-based distribution-led growth.