Fedbank Financial Services (Fedfina) is best placed in the current cycle by: 1) staying ahead of the curve in recognizing stress in S-LAP (three quarters ago); and 2) revamping its entire vertical to ensure quality growth and M-LAP alongside the gold loans business (low delinquencies), contributing >70% of total AUM and reducing the share of unsecured BL (~2% of AUF as on Jun’25). Further, ~70% fixed rate book (24% S-LAP and 40% gold), along with an annual reset for the rest of the floating rate assets and 45% of borrowing being EBLR/repo linked, provides tailwind to NIMs. Credit cost moderating to 80bps vs. 100bps QoQ, even during challenging times, leading to RoA improvement of 10bps QoQ to 2.3% during Q1FY26, is testimony of its successful execution of revamped business strategies.
OutlookMaintain BUY with an unchanged TP of INR 150, valuing the stock at 1.75x PBV on Sep’26E BVPS.
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