IndoStar Capital Finance reports 28% PAT growth, announces major divestitures and NCD issuance

IndoStar Capital Finance Limited, a leading non-banking financial company (NBFC), revealed its financial results for Q2 FY 25 on October 18, 2024. The company has reported consolidated assets under management (AUM) at ₹10,112 crore, reflecting a 6% quarter-on-quarter increase from ₹9,565 crore in Q1 FY25. Moreover, consolidated PAT soared by 28%, reaching ₹32 crore for the quarter, amid rising demand for commercial vehicle financing and strategic business restructuring.

Solid AUM Growth and Vehicle Finance Surge

IndoStar’s vehicle finance division remains a key driver of its success. The Vehicle Finance AUM for the second quarter stands at ₹6,964 crore, an impressive 10% growth compared to Q1 FY25, and a staggering 59% year-on-year jump. Disbursements in the vehicle finance segment have also spiked, touching ₹1,449 crore, a 53% rise from Q2 FY24. The surge is attributed to an increase in demand for used commercial vehicles (CV), a market where IndoStar continues to maintain a robust presence.

Sale of Home Finance Arm: Reshaping Strategy

A major development within the company was the announcement of the sale of its wholly-owned subsidiary, IndoStar Home Finance Private Limited (IHFPL), to WITKOPEEND B.V., an affiliate of global private equity investor EQT, for a consideration of ₹1,750 crore. This sale is currently subject to the approval of the Reserve Bank of India (RBI), along with consent from lenders and shareholders. IndoStar indicated that this strategic move aligns with its focus on simplifying its business structure and enhancing core operational efficiency.

Reducing Stressed Assets: The Sale of Corporate Loan Book

In a bid to strengthen its balance sheet, IndoStar successfully sold a pool of stressed assets worth ₹357 crore to Pridhvi Asset Reconstruction and Securitisation Company Limited. The legacy assets included loans from the corporate book and the Commercial Vehicle business, suggesting IndoStar’s intention to de-risk and streamline its asset portfolio for a more sustainable future.

Debt Fundraising Through NCDs

During Q2 FY25, IndoStar also ventured into raising capital through its first public issuance of secured, redeemable, non-convertible debentures (NCDs), raising ₹266 crore. The proceeds will likely be deployed towards further improving capital structure and driving business growth.

CRISIL Rating Upgrade to ‘Stable’

In another confidence boost, CRISIL, a prominent credit ratings agency, upgraded IndoStar Capital’s long-term rating to ‘Stable’ from ‘Negative’ on September 9, 2024, reaffirming it at ‘CRISIL AA-‘. This improvement in rating reflects the company’s enhanced capital adequacy, better risk management, and sustained improvements in operating performance.

Expert View on IndoStar’s Strategic Moves

An industry expert stated that IndoStar’s sale of non-core assets and the consistent growth in vehicle finance reflect prudent management of business risks and a tactical focus on core business areas. The financial improvement is a clear indicator that IndoStar’s efforts in de-risking and consolidating its focus areas have started to yield significant financial benefits.