ESAF Small Finance Bank Ltd

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.

Financial highlights

• Total business crossed ₹50,000 crore in Q1 FY27.
• PAT ₹80 crore, continuing sequential recovery.
• Interest income ₹1,098 crore, +33% YoY.
• PPOP ₹349 crore, +179% YoY.
• NIM 7.9% in Q1 FY27.
• Gross advances ₹23,216 crore, +27% YoY.
• Secured advances ₹14,465 crore, +35% YoY; 62% of portfolio.
• Deposits ₹26,924 crore, +19% YoY.
• CASA ₹6,297 crore; CASA ratio 23.4%.
• Provision coverage 85.5%; NNPA 0.8%; GNPA 5.4%.
• Credit to deposit ratio 82.3%.
• LCR 133.3%; CRAR 23.9%.
• Slippages down 84% YoY; 29% QoQ.
• Cost of funds 7.1% vs 7.4% in Q1 FY26.
• EH portfolio grew 185% YoY.

Strategy and momentum

• Strategy focuses on diversified, secured, customer-centric portfolio.
• Transformation ongoing; investments in technology and risk management.
• Expansion focus across MSME, Agriculture, Retail, Gold Loans.
• Total business momentum supports sustainable profitability.

Business Overview

• ESAF SFB focuses on financial inclusion with a rural/semi-urban footprint.
• Core segments include retail, MSME, agriculture, and Emerging Household lending.

Operational Highlights

• Total business reached ₹51,140 crore in Q1 FY2027.
• Net interest income ₹584 crore; NIM 7.9%; yield on advances 17.2%.
• Deposits ₹26,924 crore; CASA ₹6,297 crore; CASA ratio 23.4%.
• GNPA ₹1,253 crore; NNPA ₹184 crore; PCR 85.5%.
• PAT ₹80 crore; QoQ growth 241%.
• Secured advances 62% of portfolio; EH up 185% YoY; Micro Finance down 58% YoY.
• Customer base crossed 1 crore; total business ₹50,000+ crore.
• Branch network: 821 outlets, 1,064 service centers, 2,505 BCs across 24 states and 2 UTs.

Financial Performance

• Total income ₹832.32 crore; net interest income ₹584.08 crore; other income ₹248.24 crore.
• Operating expense ₹483.34 crore; Pre-provision operating profit ₹348.98 crore.
• Provisions ₹241.96 crore; Profit before tax ₹107.02 crore; Profit after tax ₹80.08 crore.
• Earnings per share (diluted) ₹1.55.
• Balance sheet: Deposits ₹26,924 crore; Borrowings ₹2,112.67 crore; Total assets ₹31,429.22 crore.
• Capital adequacy: CRAR 23.9%; PCR 85.5%.

Capital & Liquidity

• Equity capital ₹515.95 crore; Reserves ₹1,347.87 crore.
• Deposits grew 19% YoY and 4% QoQ.
• Borrowings declined to ₹2,112.67 crore from ₹2,752.74 crore.

Strategy & Outlook

• MARG strategy targets secure lending pillars: MSME, Agriculture, Retail, Gold.
• Increase deposits, advances, and fee income.
• Leverage technology and data analytics for risk management.
• Deeper penetration via more branches, ATMs, and BCs.
• Asset quality recovery through data-driven collections.
• Sustain ESG leadership; CareEdge ESG rating upgrade to leadership category.
• Digitalisation including e-sign, cashless disbursement, and central credit processing.

Risks & Mitigation

• Asset quality improving due to secured mix; EH migration reduces microfinance risk.
• NPA levels remain elevated; mitigated by ARC transfers and enhanced collections.

Governance & Leadership

• MD & CEO: Kadambelil Paul Thomas.
• Board includes independent directors such as Karthikeyan Manickam and Ajay Sharma.
• Listed on BSE/NSE in Nov 2023; ESG rating upgraded to CareEdge 75.4.
• ISO 26000 certification received FY23-24.

Financial results and audit status

• Unaudited standalone results for quarter ended 30 June 2026 approved.
• Limited Review Report on results issued with unmodified opinion.
• CAR at 23.86% Basel II as of 30 June 2026.
• Regulatory disclosures under Regulation 52(4) provided for quarter ended 30 June 2026.
• Utilization of NCD proceeds disclosed; proceeds fully utilized per objects of issue.
• Press release and investor presentation to be released separately.

Capital actions and ESOP

• Raised Tier II capital of Rs 8,500 lakh in the quarter.
• Allotted 289,182 equity shares under ESOP.
• No subsidiary/associate/joint venture as of 30 June 2026.

Auditor remarks and regulatory context

• Independent auditor's review report unmodified.
• Pillar 3 disclosures and Basel II leverage ratio not reviewed.
• Bank has no project finance exposure; not applicable under RBI directives.

Meeting Details

• Date and time: August 3, 2026, 04:00 PM IST.
• Type and mode: virtual group earnings conference call.
• Organizer: Elara Securities (India) Private Limited.
• Event purpose: discuss Q1FY27 unaudited standalone results.

Participants

• Key company participants: Managing Director and Chief Executive Officer; Executive Director; Chief Financial Officer.

Purpose

• Purpose: discuss unaudited standalone results for quarter ended June 30, 2026 (Q1FY27).

Additional Notes

• Recordings and transcript will be available on ESAF's website.
• Unaudited results and investor presentation to be posted on ESAF's site after stock exchange release.

Overview

• Standalone BRSR for FY2025-26 filed by ESAF Small Finance Bank Ltd.
• Core activity: financial services with a rural financial inclusion focus.
• 839 offices including 804 branches as of 31 March 2026.
• Operations across 24 states and 2 union territories; reporting boundary is standalone.
• Assurance: Type 2 moderate/limited by SustainEDGE.

Key ESG Risks & Opportunities

• Data security and fraud risk mitigated by enhanced risk management and ISO 27001:2022.
• Responsible lending risk mitigated via borrower evaluation, governance, and literacy programs.
• Human rights risk addressed through policies, training, and compliance monitoring.
• ESG roadmap targets: 10 million direct customers, 1 million JLGs, 5 million farmers.
• Renewable energy financing and energy-efficiency programs align with net-zero objectives.

Governance & Policy Highlights

• Board oversight via CSR & Sustainability Committee, ESG Management Committee, Sustainability Council.
• CSRSCB is the highest authority for implementation and oversight of BR policies.
• Policies cover anti-corruption, whistleblower, KYC/AML/CFT, and ethical conduct.
• External assurance: SustainEDGE Type 2; no in-year independent policy audits reported.
• Data privacy and cyber security policy in place; policy links available.

Social Responsibility & Workforce

• Total employees: 10,994 (8,797 permanent; 2,197 other); no workers.
• Gender: 7,367 male, 3,627 female; board 12.5% female (1 of 8).
• Turnover: 29.35% overall for permanent staff in 2025-26; 22.89% prior year.
• 100% health/accident insurance; maternity benefits; no explicit paternity benefits noted.
• GRACE grievance mechanism; open-door policy; dedicated email and venting box for confidential concerns.

Environmental Performance

• Total energy: 35,598.19 GJ; renewable share: 649.13 GJ (~1.8%).
• GHG emissions: Scope 1 97.75 tCO2e; Scope 2 6,627.98 tCO2e; Scope 3 10,187.58 tCO2e.
• Emissions intensity: 0.000000155 MT CO2e per rupee; PPP-adjusted 0.000003146.
• Water withdrawal: 116,347.85 KL; mainly third-party water; water consumption equals withdrawal.
• Waste: total 249.5 MT; largely food waste; no recycling; disposal via other disposal operations.

Stakeholder Engagement & Complaints

• Key stakeholder groups: employees, investors, customers, vendors, regulators, communities; multiple channels.
• Investors: 22 complaints filed in 2025-26; 0 pending; 2024-25: 18 filed, 0 pending.
• Customers: 10,892 complaints filed; 414 pending; POSH: 4 complaints in 2025-26.
• Digital complaints: ~10,681; 408 pending; 7,588 resolved; 181 pending at year-end.
• GRACE and other channels used; policy inputs inform Customer Service Committee decisions.

Other Notable Metrics

• MSME inputs: 3.95% of total inputs; all inputs sourced domestically within India.
• CSR across aspirational districts totals: Dumka (Jharkhand) 1,44,60,939; Udalguri (Assam) 8,56,100; etc.
• Policies mapped to ISO 9001:2015, ISO/IEC 27001:2022, ISO 26000:2010.
• ABAC policy, KYC/AML/CFT framework, and data privacy policy in place.
• Life cycle assessments not conducted; financial services context limits product LCAs.