Indostar Capital Finance Limited

Indostar Capital Finance Limited


About the company

Incorporated in 2009, Indostar came up with an IPO in May 2018. Promoted by Indostar Capital (Everstone group), the company started its business with corporate and SME lending. In FY 2018, they ventured into retail lending by adding Home Finance and Vehicle Finance Business. This is how they introduce themselves on their website –

“We are a professionally managed and institutionally owned organization which is primarily engaged in providing structured term financing solutions to corporates and loans to small and medium enterprise “SME” borrowers in India. We recently expanded our portfolio to offer vehicle finance and housing finance products through our wholly-owned subsidiary IndoStar Home Finance Private Limited.”

About Business

Indostar started its business with corporate lending and SME finance. The share of Corporate and retail (SME) lending in FY 2017 was 87.6% and 12.4% respectively. In 2018 they started Vehicle Finance and Housing Finance under the umbrella of retail finance. This resulted in change in their corporate and retail AUM mix which became 73.7% & 26.3% respectively at the end of 2018. Also they hired Ex-MD of Shriram Transport Finance Mr. R. Sridhar to take care of their retail lending business. Mr. R. Sridhar is the executive vice-chairman and CEO of the company. He is associated with the company since April 2017 and building his team.

Source: Corporate Presentation

Total assets of home loan and vehicle finance as of March 31, 2018 have been around INR 300 Cr. This year, they are targeting a run rate of 100 cr. Per month in VF and around 50 cr. in HF which makes a total of 150 cr per month or 1800 cr of book in FY 19 from these two verticals. Add another 150-200 cr of SME loan in it to arrive at 300-350 cr / month in total retail segment. That makes a book size of 3000+ cr in retail segment for the year 2019. (Source: Company Concall)


  • Promoters – Promoted by Indostar Capital which is backed by Everstone group and other global investors.

Source: Corporate Presentation

  • Indostar will possibly become a diversified NBFC with presence in wholesale and retail lending.
  • 100+ Branch network & 1000+ employees -
  • Major Shareholders post IPO – As on 25th May 2018 17.95% shares were held by FIIs, FPI, MFs & Banks. SBI Mutual Fund, Lenarco, BNP Paribas Arbitrage, SBI Life Insurance, ICICI Prudential Life Insurance, SBI Amundi Funds, Fidelity Investment Trust, ICICI Lombard General Insurance, HDFC Standard Life Insurance, Aditya Birla Sun Life Insurance, Reliance Mutual Fund, Bajaj Allianz Life Insurance, Max Life Insurance, Jupiter, Sundaram Mutual Fund & Reliance Nippon Life Insurance. 58.95% is held by promoters and remaining by others.
  • Strong Credit Rating –
    Source : Corporate Presentation

Business Opportunities

  • Retail loan which comprise of Housing Finance, SME Finance & Vehicle Finance to double from here in next 2-3 years.
  • Vehicle Finance is going to be the growth driver for next couple of years. As mentioned above, they are primarily into used vehicle finance where yields are high and so are the NPAs however higher yields will take care of high NPAs.
  • Focussing on Corporate Lending and vehicle finance business, where yields are high, and targeting it to be around 70-75% of total assets. Both the businesses are expected to have a spread of 600 basis points.
  • Low base advantage – They have recently started VF and HF business and the AUM base is low at present. This is going to result in high growth rate in these verticals in the years to come.
  • Aggressive expansion – In 2018 itself, company opened 100 branches. This aggressive expansion will ensure high growth in loan book in years to come. In short term it may have negative impact on costs and return ratios but gradually cost will come down and with incremental revenue flowing in; their ratios will improve as well.
  • With change in borrowing mix, Cost of borrowing is coming down

    Source: Corporate Presentation

Indostar, with a Market Cap of around 4800 cr. and sales of Rs. 715.54 Cr (expected to grow from here due to aggressive targets in VF business) look cheap on valuation front. CMP of Rs 510 and Book Value of Rs. 262.75 translate P/B to 1.94 which is cheapest amongst NBFCs. Also with EPS of 29.95, PE comes to 17.02 which again is not too expensive for a growing company.

However there are few risk areas which are as follows -

Key Risks

  • Interest rate volatility – With interest rates rising in India, this could adversely impact their lending and treasury operations thus impacting their net interest income.

  • Execution of new ventures – Not being able to execute newly started ventures could result in adverse impact on NIMs and overall results of the company.

  • Increased in NPA

Company’s Gross NPAs were 890.00 million, or 1.7% of Gross Advances as of December 31, 2017,
as compared to 727.34 million, or 1.4% of Gross Advances as of March 31, 2017 and 100.00 million, or 0.2% of Gross Advances as of March 31, 2016.

Company’s provision for NPAs was 182.86 million as of December 31, 2017, as compared to 107.82 million as of March 31, 2017 and 20.00 million as of March 31, 2016. Company’s Gross NPAs and provisions have increased in recent periods and may continue to increase in future.

  • Exposure to specific sectors – Housing finance (HF)/Real estate are the sectors which are not doing well these days and in used vehicle finance business deviation (NPA) is usually high. For Indostar, HF and SME segments have low yields and have a spread of around 200-250 basis points. These two verticals are going to drag down overall yields for the time being.

  • Dependence on key Person – Hired Mr. R. Sridhar, Ex-MD of Shriram Transport finance to drive its retail foray. He is the key person as of now who is driving the retail lending growth. Over dependence on him is another key risk factor.

  • Competition – Most of the verticals in which company operates in except Used VF business are such where there is high competition mainly from banks, HFCs, MFIs and NBFCs. In Corporate lending business, existing players Edelweiss, L&T and in real estate we have Piramal, PNB Housing & L&T to name few.

  • Regulatory Changes – NBFC business is a regulated business and any change in regulations may adversely impact the company.

  • Macro Factors – Sale of commercial vehicles (CV) is positively co-related to various macro factors like GDP growth and per capita Income etc. Any deterioration in Indian/Global Macro picture can adversely impact of CV sales and business verticals like Home Finance, SME & Corporate Loans as well.

Company details

Registered & Corporate Office: One Indiabulls Center, 20th Floor, Tower 2A, Jupiter Mills Compound, Senapati Bapat Marg, Mumbai - 400013, Maharashtra, India
Telephone : +91(22) 43157000, Facsimile : +91 (22) 43157010
Contact Person : Jitendra Bhati, Company Secretary & and Compliance Officer
E – mail :
Website :

Disclaimer: - I’m not a SEBI registered Investment adviser and this is not an Investment Advice. I have recently taken a tracking position in this company and my views are positively biased. Please consult your investment adviser before Investing.


Couple of observations, entry into vehicle finance is the most interesting differentiator as well as key area of opportunity for this company. As CV prices have increased a lot in the last 4-5 years single lorry owners are unable to afford new vehicles and will increasingly go for resale vehicles expanding the market. Shriram is the only focussed large player in that area, there is definitely space for a good 2nd guy. Since the team in this is ex-Shriram I assume lower level is also being poached from there, which should bring a lot of expertise on the table. Also with the management issues at Shriram group (owner looking to sell since 2-3 years), it is possible they may not be as focussed operations as they would be otherwise (just a theory - no knowledge of that).

I am not too enthused about home finance, seems very overcrowded as of now, everyone from PSU banks and microfinance guys are looking at that sector only in addition to the usual suspects.

Key sweetener is the valuations, which like you said are among lowest in the sector (though one can note they are very comparable to Shriram). It’s an interesting opportunity but I would say it is a 2-3 year play atleast because it will take time to build the book for home & vehicle finance and there may be high setup costs initially. Also one needs to consider whether overall valuations for the sector may fall in a rising rate cycle - so approx 2 P/BV might relatively not be as low as it is today.

Nevertheless looks like as good option to make a calculated long term bet.


Magma seems to be a company comparable to Indostar.

It has been cleaning up its books post induction of a new management team. Its focus too is SME and used assets (used vehicles), mortgage based and home financing etc.

Mr Kaushik Banerjee is ex Chola guy and now is president and looks after asset backed finance business. Company has formed strategic business units with each unit having a head who looks after that particular line of business.

They have put in place systems and technology for recoveries also to get early warning about defaults so that they can take appropriate actions.

Coming to valuations parameters, BV is 98, EPS 10, FY 18 ROA 1.5% (compared to 0.1 for FY 17)
Gross NPA has come down from 8.8 to 7 and net NPA has come down to 5.2% from 7.5 as compared to FY 17.

AUM has remained stagnant and in FY 18 presentation and concall management hints at growth in assets and improvement in margins going forward.

Magma is a very old company which was a sleepy company which seems to be waking up with a new team at the top. Lets see how they deliver what they promise.

disc: invested.


Q1FY19 results are out.
Cover_Letter_PR_Pressentation.pdf (1.5 MB)

Expected growth in AUM fuelled by focus on Retail book. GNPA/NNPA maintained, standard asset provision is up but so is the AUM - so expected behaviour. NPL provisioning not excessive.

Investment in OpEx is expectedly showing on the bottomline.

Understandably the Ind AS impact optically increases the drop in PAT, but it becomes clear in the presentation.

Only one thing I do not quite understand is the 7+ Cr one time write off they have taken this quarter. Could anyone with expertise in NBFC/Banking provide some advice? Hi @Yogesh_s do you by any chance track this company? Could you have a look?

My notes are here


Centrum Broking
IndoStar Capital (Buy)

CMP: ₹459.1

Target: ₹600

IndoStar Capital Finance has embarked on a transformational journey and with the right mix of people, product portfolio, processes and the required infrastructure, we believe the business model is on the right growth path.

We expect IndoStar Capital to report a) strong earnings profile (38 per cent/ 22 per cent CAGR in revenue/ earnings over FY18-20E); b) limited asset quality risks (given the history of near zero NPAs); and c) superior returns profile (RoA at 2.7 per cent, RoE at 10 per cent+ by end-FY20E).

Healthy capital position (CAR at 28 per cent+) will supplement sturdy 45 per cent CAGR in AUM over FY18-20E. Further, proficient senior management with an element of skin in the game through ESOPs and superior board composition is an added positive.

Valuations at 1.2x FY20E ABV are undemanding. We initiate coverage on IndoStar Capital with ‘Buy’ and target price of ₹600 (valuing at 1.7x FY20E ABV). We see valuation mutliples expand as investors draw greater comfort in the transformation journey.

Key risks: Lower than expected growth, margin pressures or rise in NPAs.

Published on August 31, 2018

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Sanjay Athalye, who was heading risk at Indostar joined Aspire Home Finance Corp as MD & CEO. Aspire belongs to Motilal Oswal group.

Highlights of Q3 F19 financial result

  • Revenue is flat QOQ up 67% YOY

  • PAT up 11% QOQ and 81% YOY

  • Cost to Income ratio going down consistently

  • Improvement in ROA & ROE

Let’s wait for the concall which is scheduled on 4th Feb 2019 at 04:30 PM and the dial-up numbers are (+91) 22 62801149, 71158050.

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Motilal Oswal has initiated a report on Indostar Capital Finance with a buy rating. The target price is 525.
Here is the link for reference if anyone is interested

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Indostar had a tepid listing around 600 last year in May 2018 with ipo price around 570-72. Post that it has been continuously in downtrend and made a low of 275(more than 50% erosion from ipo price). thanks to the NBFC crash recently. Now the stock seems to be in uptrend with 30-35% upmove in last 6 months. Its a very new company in this space but most of the Brokers have given positive ratings to this stock.I am holding one lot in it from IPO. Basically applied for listing gains as I found the financials good enough however it didn’t turn out to be a good bet.Still Holding. @hitesh2710 bhai any views on it currently ? Is it a good idea to average out now at cmp since I see a positive momentum here. Financial ratios looks decent :

Indostar Capital Finance Ltd :
Market Cap: 3,824 Cr
Book Value: 315.42 Rs
Stock P/E: 18.55
ROCE: 11.03 %
ROE: 11.14 %
ROA: 3.66 %
ROIC: 62.28 %
Debt to equity: 2.26
Promoter holding: 60.29 %

High exposure to Real Estate in Mumbai, almost 45% of its portfolio. This does not bode well. The share price is likely to continue the fall. Sooner or later, the company will have to provide for possible NPAs. Till the management provides clarity and a plan to get that money moving, I think one should wait and watch.

Reg. LAS:

0E0CD54F_6D6D_4061_BE4E_37F473D6AA1F_185709.pdf (168.0 KB)
From Dec 2018

and from Feb 2019
3A7BE372_EF5A_46EB_8C80_2E7D5D809215_165316.pdf (1.9 MB)

And they say this in Q4FY19:

"Sir, this is the first time I am on this call and some of the questions in relation to
the real estate book have been answered. What I wanted to understand was on the wholesale
book? Are there any loans against shares for the promoters or anything else?

Shailesh Shirali: This also I mentioned last time, we have only one loan against shares; There is a Rs 200 Crores
loan to the promoters of Essel group against collateral of shares of Zee Entertainment"


I have only one question in our corporate lending book do we have any significant exposure in
Shailesh Shirali: Yes, we have only one exposure where we have an exposure to ESSEL group promoters - Zee
shares. This is about 200 Crores and we are adequately covered with Zee shares so even if the
proposed stake sale happens at today’s market price, we will be okay, we are fully covered.
Ronit Ramesh: But what is the limit, which we all be in a loss below any cover.
Ronit Ramesh: The price where Indostar may lose money?
Shailesh Shirali: I think we will lose money below 300 and the loan is current as of now was serviced in January also.

Q1FY20; I guess they categorized the Talwalkars exposure as ‘corporate lending’.

Q1FY20 concall on 9th august
Jayprakash T: Okay and second Sir there was news around a specific corporate account in the Fitness industry that was being rumored of having servicing issues. Could you throw some light on that?

R. Sridhar: The account that you are referring to has not slipped in servicing dues to us. They have met their servicing obligations for the month of July as well. Only one account in real estate segment has
slipped during this quarter for which we have made a provision. All other accounts are current.

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As per current result - any advice from the boarders? Retail-isation is the most positive thing…

Have been accumulating this around 180-185 for a while now. Along with Edelweiss (which has fortunately / unfortunately shot up due to sustained capital raising!).

Also this HDFC report convinced me to keep accumulating upto a certain % (5%) of my portfolio HDFC securities on Indostar

Indostar is decently respected financing circles (given its management’s Shriram Transport Finance pedigree). They have enough liquidity (17%) to weather this crisis. Also I dont think cost of capital should be elevated beyond 2 quarters. However there will be balooning of NPAs to some extent (think some real estate projects and Talwalkars will surface eventually)

However it is a good business at 0.7 times book. Better than Yes Bank in my opinion (which is now nearly 1x book post dilution)

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Yes only risk i feel at this point of time is that… Govt is planning nbfc to come under IBC… Now if corporate defaults are going to admit under NCLT than these NBFC has to provide 100 peec provision which at present is very less… Hence there will be a risk of capital erosion and at this point of pessimistic time it would be hard to get capital unless everstone steps up funding

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This company should also benefit from following development.

1)Yesterdays supreme court ruling in favour of CoC
2) auto scrappage policy…

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Does anyone know why Indostar is buzzing?

It is up by 25% in 2 days. Is it purely because of value?

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It looks the open offer is Rs.290 per share. Is it advisable to accept? I am not sure as the book value is less than 1 and good benefit for brookfield if we accept… we might lose long run… any opinions?