Motilal Oswal Initiates Coverage on Indostar Capital Finance with a Target Price of Rs 290

Motilal Oswal Maintains Buy Rating for Indostar Capital Finance

Indostar Capital Finance (INDOSTAR) reported a mixed operating performance during the quarter, with a pickup in business momentum, as evident in the sequential improvement in both disbursements and AUM growth. However, the company reported losses in the quarter due to elevated credit costs from additional management overlay and one-time provisioning on the SR book. Further, asset quality weakened during the quarter, as GS3 rose ~70bp QoQ, due to slippage from the legacy loan book.

The company's performance was impacted by elevated SR provisions, which led to reported losses. However, the provisioning process is now complete, indicating a positive outlook for future results. In its research report, Motilal Oswal estimates a strong growth trajectory for Indostar Capital Finance, with a compound annual growth rate (CAGR) of 24% in assets under management (AUM) and 62% in profit after tax (PAT) over the period of FY26-28.

The research firm expects expansions in net interest margin (NIM) to 9.9% and 9.8% in FY27E and FY28E, respectively, which will contribute to the company's growth. Additionally, moderation in credit costs and improvement in operating efficiencies are expected to support the company's financial performance. Motilal Oswal has reiterated a BUY rating for Indostar Capital Finance with a target price of INR290, premised on a book value per share (BVPS) of 1.1x for March 2028 estimates.

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