Increasing the debt can happen in one of the two ways
A) AUM remains at Rs 105,000 Cr which means management’s claim of asset light is breached. Management has guided that only 35,000 - 40,000 Cr will be on its books as of FY27. Eventually only 20% of AUM remains on the company’s books as part of the asset light model
B) AUM rises substantially above 105,000 Cr (in the range of 130,000 - 150,000 Cr) by end of FY2027 while on book assets are in the handle of 60,000 Cr. I am not too sure about this.
As to your other point about rerating, my view is as follows:-
Market re-rating will happen on account of a) improvement in earnings from 1200 Cr to 1800 Cr, and more importantly, b) improvement in the quality of earnings. Today’s 1200 Cr earnings quality is of a much inferior value considering the provisions not yet taken on the legacy book. Assuming even a 10% incremental haircut on the legacy book of 36,000 odd cr, it amounts to additional provisions for FY25-27 of Rs 3600 Cr (which incidentally is also the amount of rights issue fundraise by the company). Dividing this over 3 years will equate to Rs 1200 Cr provisions per annum to write down the legacy book. Hence, the market is probably not valuing current earnings adequately (or at all) expecting this hit at some point in the next couple of years unless management can show its ability to wind down the legacy book without any incremental provisioning
On the other hand, the quality of Rs 1800 Cr earnings of FY27 would be much superior as all of that will be coming from the asset light business where the underwriting is vetted by the company and the partner bank. The testament of that quality will be in the 30-40% dividend payout to the tune of Rs 8 - 10 per share.