ESAF Small Finance Bank Ltd

ESAF Small Finance Bank Limited – Closure of trading window from October 01, 2026 until 48 hours after the announcement/declaration of the Unaudited Standalone Financial Results of the Bank for the quarter and half year ended September 30, 2026.

Capital raise

• Board approved private placement of unsecured, redeemable Tier II NCDs up to ₹500 crore, in more tranches.
• Issuance to be within the borrowing limit approved at the 10th AGM on 14 Aug 2026.
• Management Committee authorized to determine terms, conditions, and related actions for the NCD issue.
• NCDs proposed to be listed on NSE's NTRP or BSE Wholesale Debt Market.

ESOP Allotment Details

• Allotted 11,757 equity shares under ESAF ESOP 2019 on Sep 22, 2026.
• Shares have face value Rs 10 per share; exercise price Rs 10; premium NIL.
• Post-issue total issued shares: 51,61,20,301.
• Post-issue total issued share capital: Rs 516,12,03,010.
• All shares rank pari-passu with existing equity shares.
• ISIN for the issued shares: INE818W01011.

Meeting Details

• Date: September 23, 2026

Key Agenda Items

• Consider and approve issuance of Tier II NCDs on a preferential private placement.
• Within existing borrowings limits approved by shareholders on Aug 14, 2026.

Other Notes

• Intimation to be posted on the bank's investor relations website.

ESOP Allotment Details

• Allotted 90,418 equity shares under ESAF ESOP Plan 2019 upon vesting of options.
• Date of allotment: September 01, 2026.
• Date of issue of shares: September 02, 2026.
• Exercise price per share: Rs 10.
• Par value per share: Rs 10.
• Premium per share: NIL.
• ISIN: INE818W01011.
• Total issued shares after this issue: 51,61,08,544.
• Total issued share capital after this issue: Rs 516,10,85,440.
• Shares rank pari-passu with existing equity shares.
• Lock-in on shares not applicable.

Rating action & agencies

• CARE reaffirmed ESAF SFB ratings on NCDs and CDs; long-term outlook revised to Stable from Negative.

Instruments & ratings

• Lower Tier-II Basel-II bonds ₹150 crore: CARE A-, Stable; Outlook from Negative.
• Lower Tier-II Basel-II bonds ₹130 crore: CARE A-, Stable; Outlook from Negative.
• Lower Tier-II Basel-II bonds ₹500 crore: CARE A-, Stable; Outlook from Negative.
• Tier-II Basel-III bonds ₹20 crore: CARE A-, Stable; Outlook from Negative.
• Certificate of Deposit ₹500 crore: CARE A1; Reaffirmed.

Key rating drivers

• Outlook Stable due to moderation in slippages and improved profitability.
• GNPA 5.40%, NNPA 0.83% as of 30 Jun 2026; net stressed assets 11.94%.
• PAT positive in Q1 FY27; RoTA 1.04%; annualised credit cost 3.1%.
• MF/unsecured 38%, secured 62%; gold loans 42% of gross advances.
• CAR 23.86%; Tier I 15.90%; gearing 18.18x; FY27 equity raise anticipated.

Liquidity & funding

• Liquidity adequate; LCR 132%; deposits ₹26,924 crore; CASA 23.39%.
• Deposits constitute 86% of liabilities; access to RBI LAF/MSF and refinancings.

Material changes since last rating

• Outlook revised to Stable; ratings reaffirmed across rated instruments.

Board committee reconstitution

• Board approved through circular resolution on Aug 21, 2026 to reconstitute committees.
• Reconstitution becomes effective from September 1, 2026.
• Committees affected include Audit, NRCCB, RMCB, SRCB, CSRSCB.
• Annexure provides new director nominees and roles per committee.
• Audit Committee: Ashok Dhamankar (Chair), Ranjani Chandramohanan, Ajay Sharma, Hari Velloor.
• NRCCB: Prof. Biju Varkkey (Chair), Karthikeyan Manickam, Ranjani Chandramohanan, Hari Velloor.
• RMCB: Ajay Sharma (Chair), Karthikeyan Manickam, Kadambelil Paul Thomas, Ashok Dhamankar, Hari Velloor.
• SRCB: George Ittan Maramkandathil (Chair), Ranjani Chandramohanan, Kadambelil Paul Thomas, Ashok Tukaram Dhamankar.
• CSRSCB: Karthikeyan Manickam (Chair), Kadambelil Paul Thomas, George Ittan Maramkandathil, Ashok Tukaram Dhamankar.

Instruments Rated

• Tier II Basel III bonds, ₹20 crore; upgraded to BWR A-/Stable from BWR BBB+/Stable.

Rating Action & Outlook

• Action: Upgrade; Outlook: Stable; by Brickwork Ratings for Tier II Basel III bonds.

Rationale Highlights

• Asset quality improved; GNPA near 5%, Net NPA below 1% as of 30 Jun 2026.
• CRAR at 23.9%; Tier I 15.9%; supported by ongoing capital infusion.
• Q1 FY27 net profit ₹80 crore; FY26 net loss due to asset-quality concerns.
• Liquidity: LCR 140%, NSFR 165%; adequate liquidity buffers.
• MARG strategy supports diversification; secured assets 62% of advances; MF exposure down.
• Governance: strong board; promoter backing; stable management.
• Competition and CASA drift pose risks; margins pressured; concentration in South India.

Material Change

• Rating upgraded from BBB+/Stable to A-/Stable.

Financial Performance

• Total deposits: INR 26,924 crores, up 19% YoY.
• Retail deposits: INR 24,487 crores, 91% of total deposits.
• CASA ratio: 23.4%.
• Gross advances: INR 23,216 crores, up 27% YoY.
• Secured loan book: INR 14,465 crores, up 35% YoY.
• Unsecured loan book: INR 8,751 crores, up 16% YoY.
• NII: INR 584 crores, up from INR 378 crores.
• NIM: 7.9%; likely above 7.5% going forward.
• PPOP: INR 349 crores, up 179% YoY.
• Operating expenses: up 1% QoQ; 8% YoY; C/I 58%.
• Gross NPA: 5.4% (down from 7.5% YoY).
• Net NPA: 0.8% (down from 3.8% YoY).
• Slippages: INR 75 crores vs INR 468 crores YoY.
• Provision: INR 65 crores additional this quarter; PCR 86% (81% without extra).
• Credit cost: 4.4% annualized; expected around 2% by year-end.
• PAT: INR 80 crores; up from INR 24 crores in prior quarter.
• ROA: 1%; ROE: 17.5% (annualized).

Portfolio and Mix

• MARG portfolio: INR 12,909 crores; up 42% YoY; 56% of total.
• EH portfolio contributed 32% of gross advances.
• EH loans grew 185% YoY and 14% QoQ.
• Gold loans make up 40-45% of book; overall LTV 72%.
• MFI group loans degrown; migrating to individual and secured.
• Corporate loans exposure reduced; expected to stay in current range.
• Distribution footprint: 821 outlets, 721 ATMs, 1,064 CSCs across 24 states and 2 UTs.
• Total customers: 1.04 crore; 1.86 lakh added in Q1.
• ESAF 2.0 StratoNeXt: fully implemented by year-end.
• Leadership: National Head, Branch Banking; Chief Risk Officer appointed.

Funding and Liquidity

• Retail deposits comprise 91% of total deposits.
• CASA ratio: 23.4%.
• Liquidity Coverage Ratio: 133.31% as of 30 June 2026.
• CRAR around 24%; promoter holding target 26% by 2032.
• Exploring Tier-1 capital; timing to be decided.
• Branch network: 821 outlets; 50 new branches planned for FY27; 17 opened.
• Total customers: 1.04 crore; 1.86 lakh added in Q1.

Asset Quality and Provisions

• Gross NPA declined to 5.4% from 7.5% YoY.
• Net NPA declined to 0.8% from 3.8% YoY.
• Slippages fell to INR 75 crores from INR 468 crores YoY.
• Provision coverage ratio stood at 86% (would have been 81% without INR 65 crores extra).
• Credit cost annualized 4.4%; expected to fall to ~2% by year-end.

Growth and Transformation

• ESAF 2.0 StratoNeXt to be fully implemented by year-end.
• MARG and EH growth form core growth engine; secured lending expansion.
• Emerging households loans grew 185% YoY; 32% of gross advances.
• Gold loan exposure 40-45% of book; LTV 72%.
• Branch expansion focus in semi-urban and rural; 25% rural branches.
• New leadership: National Head, Branch Banking; Chief Risk Officer.

Q&A Highlights

• Credit cost expected around 2% by FY27 year-end; ROA around 2% by year-end.
• PSLC income was 69 crores in Q1; expected to continue at a lower pace.
• Effective tax rate around 25.5%; DTA offsets cash tax.
• CRAR around 24%; exploring Tier 1 capital; promoter holding target 26% by 2032.
• Disbursement in the quarter around INR 8,500+; pace to stay in line YoY; QoQ lower.

Meeting Details

• Date and time: August 3, 2026, 04:00 P.M. IST.
• Type and mode: group earnings conference call (virtual).
• Organiser: ESAF Small Finance Bank.

Participants

• Key participants from the company: Company Secretary and Compliance Officer.

Purpose

• Purpose: discuss the bank's financial results for the quarter ended June 30, 2026.

Additional Notes

• Recording: audio recording uploaded on the bank's investor relations site.