Suryoday Small Finance Bank Ltd (BOM:543279) (Q2 2027) Earnings Call Highlights: Gross Advances ...

Q: Is the 30-35% advances growth guidance for FY27 intact, and how will the mix between inclusive finance and retail assets evolve? A: The CFO confirmed the 30-35% growth guidance stands and the bank will clearly be better than the lower end. Mortgages and CV are expected to sustain secular growth of more than 35%. On mix, the current split is around 41:59 (IF:RA); the bank may not reach 45:55 by year-end but will maintain that as a medium-term target to deliver the guided returns.

Q: Given CRAR of 19.37% in Q2, how much runway does the recent Tier 2 raise provide before fresh Tier 1 capital is needed? A: The CFO stated the Rs 200 crores raised in early October improves CRAR by about 1.8%, and another Rs 200 crores is planned before year-end (pending rate stabilization), adding a further 1.8-2%. This should be comfortable for the growth guidance. The MD & CEO added that with ~Rs 300 crores of expected FY27 profit accruing to capital, the Tier 1 comfort zone is now around 18.5-19% rather than 20%.

Q: What is the exposure to drought-affected districts in Karnataka and Maharashtra, and has any impact been seen on collections? A: Management (Executive Director) disclosed around Rs 1,100 crores of exposure in the affected areas, with no significant change seen in September and October collections so far. The bank will remain cautiousavoiding new-to-credit customer onboarding in the eight identified districts for FY27while continuing to serve existing customers with good track records. The MD & CEO noted the portfolio is largely semi-urban rather than rural, limiting direct impact, though lagged effects are being monitored.

Q: Why did NIM stay flat quarter-on-quarter despite higher yields and the Rs 600 crore claim receipt? A: The CFO attributed the flat NIM to a Rs 37 crore quarter-on-quarter drop in PSL/PSLC income (Rs 8 crores in Q2 vs ~Rs 45 crores in Q1, with only ~Rs 5 crores expected in Q3), partially offset by ~Rs 14 crores of incremental CLOE convenience fees. The MD & CEO added that the bank is carrying excess liquidity (from the Rs 600 crore claim and Rs 200 crore raise), which also weighed on NIM. Marginal improvement is expected ahead, aided by a slightly higher MFI share.

Q: How should investors view the sharp dip in provision coverage ratio this quarter? A: The CFO explained that PCR including the CGFMU cover available is closer to 90%. The reported PCR fell because the bank wrote off almost Rs 600 crores after receiving the claim at the start of the quarter. For the IF GNPA, only ~27% provision is carried since 73% is covered under the scheme; the expected claim receivable is left unprovided to avoid distorting income recognition when cash is received.

Q: What is the credit risk profile of the fast-scaling credit line on UPI (CLOE) business? A: The MD & CEO described CLOE as a charge-card-like product where customers pay 100% of spends monthly, with credit outstanding on the book for only 15-20 days on average. Over 14 lakh customers have been onboarded, and the book could reach Rs 500-600 crores by year-end. Current stress is very comfortable (~1.5%) and substantially lower than the income generated. Management noted one year of curation is needed to fully validate credit behavior, and average ticket sizes are small, making it more a convenience product.

Q: What drove the improvement in reported asset quality, and what is the outlook on slippages? A: Gross NPAs declined to 2.9% from 6.5% in June, supported by Rs 387 crores of CGFMU claims received in July and write-offs/OTS of Rs 596 crores of legacy stressed assets. Current bucket efficiency for IF was stable at 99.3% in Q2 vs 99.2% in Q1. On slippages, the CFO noted a modest increase across segments (including CV and IF), with the MD & CEO characterizing the Rs 40-60 crore range as reasonably comfortable and expecting rollbacks/recoveries in specific one-off accounts.

Q: What is the status of the balance Rs 200 crores Tier 2 capital raise, and are other capital optimization levers being considered? A: The CFO said the bank is waiting for rates to stabilizeshort-end rates are volatile and no definitive five-year Tier 2 pricing is availablewith completion expected by December or latest Q4 FY27. On optimization, the bank continues to evaluate IBPC renewals (last done at under 5% for six-month money) and treasury options such as fixed vs variable rate borrowings; NABARD variable-rate borrowings of Rs 1,200 crores at ~8.5% have repriced to ~7.5% with rate cuts.

Q: How is the cost-to-income ratio expected to trend given CGFMU expenses and the shift toward secured lending? A: The CFO clarified that the reported CTI of ~70.5% includes digital banking partner payouts; adjusted for these on a net basis, CTI is ~68.6% (vs 72.9% in H1 FY26). He does not expect significant savings on CGFMU expenses since the MFI share of business will remain broadly similar, implying limited structural moderation

For the complete transcript of the earnings call, please refer to the full earnings call transcript .