Emerald Finance Limited (EMERALD.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 and 9M FY '26 Results Conference Call of Emerald Finance Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [ Mr. Ronak ]. Thank you, and over to you.

Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Emerald Finance Limited. From the management team, we have Mr. Sanjay Aggarwal, Managing Director; Mrs. Gurmeet Kaur, Chief Risk Officer; and Mr. Talin Aggarwal, Head of Business Development. Over to you, sir. Thank you.

[Audio Gap] 2026 Earnings call for Emerald Finance Limited. With me is Ms. Gurmeet, our Chief Risk Adviser; and Talin, who is the Chief Business Advisor and heading the tech-tech team. On behalf of the management team, I extend my sincere appreciation to all our stakeholders, investors, analysts for joining us today. We have concluded first nine months of FY '26 on a decent note and with a healthy financial growth, operational progress and expansion on all the three verticals in which we are operating in. Our EWA as well as gold loan syndication business has continued to gain more attraction, supported by our rising digital adoption in our company. For the first nine months, our total stand-alone income grew by 68%, and our net profit jumped by 104% to INR 8.7 crores. On a consolidated basis, our total income has increased by 42% to INR 21.4 crores and our net profit grew by 73% to INR 10.7 crores. The results highlight the strength of our asset-light model and effective cost management. Operationally, our third quarter reflected a steady progress in our digital and lending initiatives. We have launched our mobile app, plus we have become one of the few companies in India -- finance companies in India to do disbursement via WhatsApp. Also, we have done a syndication of more than INR 105 crores in gold loans only in the month of December. In the previous quarter, we were thoroughly audited by CRISIL for the annual review. And I'm glad to inform you that CRISIL has upgraded our investment grade to BBB- from the previous BBB+ rating. This will help us in further raising of funds and reduce cost -- reduction in the cost of our funds. Before I conclude, I would like to thank all our shareholders, customers, partners, employees for their continued trust and support. And lastly, I would like to point out in the last year, we have a deposit total tax of INR 2.22 crores. And for the first nine months, we have already made a provision for INR 3.63 crores. As well on the CSR front, last year, we did a CSR of INR 18.46 lakhs. This for the first nine months, we have done already done INR 28 lakhs. With this strong foundation and disciplined execution, we are confident of sustaining our growth momentum and building Emerald Finance into a scalable and more importantly, [resilient financial enterprise. I will now open for question-and-answer.

[Operator Instructions] The first question is from the line of [ Rohit Aurora ], an Individual Investor.

Sir, as previously at the start of this financial year, our guidance was to add around 250 EWA clients, and currently, we have reached 180.

Yes, 180. 70s -- if you look at for the guidance, [ 70 some ] short.

Yes, 70. And are we still comfortable to achieve?

Yes. There is one thing we received a lot of applications in the last quarter, but there were a lot of rejection from our side. So given the market turbulence, we are very careful on the credit part. So there is a lot of rejections that time see rather than achieving 250, we are more focused on the credit quality, what we are underwriting the corporate that should be good.

We are looking to add

Come again?

We are looking to add corporates of size of almost

No, what is -- like normally, we undertake corporates of 100 -- with 100 employees plus. Of course, we did a lot of application, as we continue to receive a lot of applications, but we are tightening our credit norms. Given the turbulence in the market now and the overall economic situation, we are very careful in onboarding the corporates. So that is why we just onboarded 30 corporates in the last quarter.

Yes. That's why I was asking the question.

Yes.

So if I may just pitch in here, sorry. So actually, we revised our underwriting and credit policy on the 1st of October 2025, given the market situation. So as sir mentioned that we indeed received a lot of applications and interest from companies. But given the tightening of our own credit tools, a lot of them were rejected, right? So we are actually -- are focusing on the quality of corporates we're getting rather than the quantity alone. So we, actually see towards the business front, our business has increased at a much faster pace than the corporates have -- than the pace at which we have onboarded new corporates. The idea is to now focus on the quality we are onboarding given the turbulent market conditions given -- especially in the MSME space.

But in spite of the tight credit norms, both the top line and the bottom line have grown in the last quarter.

Yes, that is very good. And are we looking to add different corporates, which are working in different -- different businesses?

Yes. We are open to all types of business lines.

And are we expanding to more geographies?

Yes, we are also already operating pan-India. We are operating as far as Chennai, Chennai this side Calcutta. We are already operating in Surat, Pune, Hyderabad.

And what are the qualities that we are looking in the corporates before acquiring them as an EWA customer?

[indiscernible]

So before we partner with any company, we essentially are looking at 2 major things. One is the cash flow statement and financial position. Second is the credit history. So as the corporate effectively defaulted on any trade lines or has any outstanding [ DPD ] is one. Second is the corporate cash rate or is the corporate profitable so they can meet salaries for the next three months. So these are the major criteria. Then we, of course, have further underwriting, which we do on the corporates.

And energy-related IPP, independent power producers are doing very good. Are we adding them as a client?

[ Come again ].

So electricity renewable related projects related companies?

If we get an opportunity to partner, we'll follow our underwriting and definitely partner with them.

The next question comes from the line of Abhi Jain from AJ Capital.

Sir, I am new to the company. So I just wanted to understand, one, in terms of the crowded market, this whole NBFC space that you are in, given that the 2 main product lines that I understand you operate in the gold loan and EWA space. Can you help us understand and can you help the broader investment community understand what is the scope and what is the breadth of the market that currently you are operating in? I mean, how much can this market grow? What is your penetration and whether you would need to diversify into other products? And just give us a five or seven year blueprint to help understand what is the ambition of the company and where can it go from here?

So let me -- let me -- sure. Let me take this. So I'll just expand the horizon a little. So we're not only into gold loan sourcing and EWA. So again, just to go back, so we incorporated back in '94, '95, we started as a loan sourcing agent for Citi Finance back then. And in 2015, we received the BSE listing along with our NBFC license. So if you essentially see our balance sheet today, we have 2 major verticals. One, we are a loan sourcing agent for 40-plus banks and NBFCs for whom we do retail loans, wholesale loans. So gold loan is part of the syndication business itself within the subsidiary. Second, we are an NBFC. So we have roughly INR 103 crores in AUM. Now the majority of this is made of business loans, MSME business loans. And EWA is a very small portion of this. So essentially, we have an entire suite of financial services, which we cater to wherever we onboard or corporate or employees in general. So combined, both the entities, we have a breadth of products, which we have and a good suite of technology, I would say there. Now going forward, the idea is to increase the book size of Emerald from INR 100 crores to another INR 200 crores to INR 300 crores in the next about five to six years, while simultaneously increasing the syndication business. On the syndication business, we receive a healthy fees without any risk. And we see a good pool of customers being sourced through our DSAs.

So breaking my next question into 2 parts. On the syndication side, how -- what is the current month-on-month growth that you are witnessing? And secondly, again, coming back to the question on the NBFC side, given that it's a crowded space, right, and the ambition right now is to grow the book from INR 100 crores to INR 200 crores, INR 300 crores in the next five to six years. I mean, there is a plethora of NBFCs, which are at a much larger scale, growing at a much faster pace. So what differentiates you? And just to understand, I mean, what is the differentiator? And how does an investor understand like how well the company understands and analyze and underwrites risk because, I mean, risk calibrated growth is something that stands out in NBFC. So can you just throw some light around that also? And secondly, [indiscernible] much on the distribution side, what is the month-on-month growth?

Sure. So I'll just start maybe with the risk part here. So our historical risk in the past 11 years since the NBFC has been in operation since we've received the license, our historical NPA has been lower than 0.4%, 0.5% historically, right? So I think in terms of our underwriting/risk, we are very, very prudent there and that reflects with our NPA numbers as well. Now coming to the distribution growth. So last year, we did close to INR 900 crores worth of distribution or about INR 1,000 crores worth of distribution combined for all the banks and NBFCs. This year, we're projecting to do about INR 1,200 crores to INR 1,300 crores. So last quarter, in fact, we did INR 400 crores in totality as syndication. And this quarter, we are expecting it to grow by a bit. Now where the moat here -- this is our distribution. right? Because again, if you're doing INR 400 crores a quarter for other banks, we see the kind of quality clients we're getting. So it's not very difficult for us to maybe source even 10% of that into our own books, right? So our distribution is very much [ sorted ] from that end. And again, in the distribution business, as we mentioned, is growing decently. We did about INR 115 crores of GL last month itself, which has been growing tremendously for us. And thirdly, being we are a technology company, we have an entire in-house technology team and the entire -- our EWA stack is built in-house. A lot of our processes are built in-house. So I think that allows us to leverage technology at a much larger scale. So even if you see our PAT margins, our PAT margins have been growing quarter-on-quarter. So last quarter, we had a PAT margin of close to 51%.

So in India, only three companies are right now focused on the EWA. One is us, other is Refyne; third is Jify in Bombay. Refyne is Chennai based. As you look at the EWA companies worldwide, they are growing at a tremendous speed, and there's no doubt that India is such a huge market that we should in the coming years, grow at a much faster speed. And it's a lot of -- we have taken checks and balances, and that's why the NPA numbers are very low.

But since the company is still new to the [indiscernible] sector, what would help and if I could follow that suggestion is that if you could lay out as part of investor deck or going forward just as a presentation, a 5-year, 10-year kind of a road map, just to understand, I mean, where do you see yourself going? What are the sectors that will grow? How will your growth will be risk adjusted, risk calibrated because that really gives an insight into what can be expected. And then people can track you down from there as to whether the organization is going in the right direction because currently, it's blue ocean in terms of understanding the company. There are so many companies, it's such a crowded space. So to give a valuation premium or just to understand the company better, you will need much more insights into the company. That's what my assumption is.

Absolutely. Two years back, our total EPS was INR 1.37. Last year, it was INR 2.57. And for the first nine months, we have crossed INR 3. If you just extrapolate, I think we should close this year on a INR 4-plus EPS. And on a year-on-year basis, almost growing 70% to 80%. [ Might this ] growth of INR 4-plus EPS this year, I think hopefully, we should touch anywhere with 7% to 8% next year.

That's what the growth interest is and

Come again.

For the long-term investors, it helps to have a vision and a road map so that we can also understand and align ourselves to that.

[indiscernible].

[Technical Difficulty] the road map document would really help. Yes.

Yes. Sure, sure. We've noted it from the next probably in the next analyst call, we will take care of it.

So basically [indiscernible] [ 1.27 ]. We are already given that we're going to 8x to 10x in next three, four years. I think we're on track for that. Quarter here or two this year because if you look at it, we almost [indiscernible] 70% year-on-year basis.

I wish you all the best and [indiscernible] from your comments and I wish all the best and happy customer journey.

There is a huge scope in EWA. So as you say, there is huge scope in EWA now. We have not even scratched the surface. So India is such a huge market. If you look at companies in Philippines or Indonesia, they have grown so big in advance. There's no reason why companies in India will not grow.

The next question comes from the line of Pratik from Qode Advisory LLP.

I just wanted to understand how much of the interest income that we generated in this quarter 3 comes from EWA and for the fee-based income, how much of that revenue comes from gold?

[Technical Difficulty]

Sure. I'll take that. So only on the EWA front, so EWA maybe don't charge any interest. We only charge a processing fee. So it's booked under the processing fee income.

Okay.

So gold loan, I think [indiscernible].

So when we are seeing fee-based income was around INR 4 crores for quarter 3, EVA would be included in this?

Correct. So if I just give you the revenue split altogether between all the 3 verticals, 4.5% of the consolidated revenue was from EWA, about 47% was interest income, the balance was fee-based income.

And gold as a percentage of fee-based income would be?

[indiscernible] 65% of that.

60% to 65% of the fee-based was from gold, right, the gold loans.

See, there's a lot of cross-selling also a lot of gold loans, which are sourcing kind of from EWA clients. So we've already done a lot of cross-selling from the existing database, lot of EWA clients, employees we are giving them gold loans also. So that [indiscernible].

Any delinquencies on the EWA front for Q3 that we saw?

Yes, yes.

Gurmeet, would you like to take that?

Yes, Sanjay.

Gurmeet? Yes.

Yes. So in the Q3, we had an NPA of about INR 26 lakhs, and that was driven by one corporate, who underwent fundamental liquidity issue. That particular corporate we had paused operations with them. And out of INR 26 lakhs from that -- from that out of INR 25 lakhs to INR 26 lakhs that we had reported to RBI as an NPA. The collection is on. And I think we'll be able to do the complete recovery of the outstanding amount by the end of February. So they don't have any

INR 17 lakhs is already recovered.

INR 17 lakhs is already recovered from them.

Out of this INR 26 lakhs.

Yes. And then we do have -- so that is the only NPA that we had and that was mainly driven by one corporate, who started facing some liquidity issue.

So in that particular case, do we block them or do we give them an additional time to make the payment? Like what happens in that case with that corporate?

So they cannot avail further disbursement. So any further outflow of the money is paused. And then our collection efforts, then the collection processes are kick started. And that is what is exactly happening with them now.

Okay. Understood.

But there's nothing to worry about this particular company because Tata and IBM are also their representatives are also on their board. They have a tie-up with them, Tata and the IBM. So out of INR 26 lakhs, what we reported as on 31st December to RBI, INR 17 lakhs we have already recovered in the month of Jan. And the balance [Technical Difficulty] should also come.

Another question I had was the current run rate for EWA earlier, it was, I think, INR 4 crores a month, and then we had gone to INR 6 crores, and the guidance was to get to INR 13 crores to INR 15 crores by FY '26. So could you just give some clarity on where we are right now?

So in the last month, we did about INR 8 crores, INR 8.5 crores worth of disbursement with 180 corporates. So the idea is that by the end of March, we should be between INR 11.5 crores to INR 12 crores.

Last question. From the borrowing cost and balance sheet growth, how much of it can be supported without further equity dilution? If you can give some guidance on that, that would be really helpful. And what is the cost of funds for us currently? And post this rating upgrade, how do you see that helping us?

The total debt equity ratio is only 0.2%. There is ample scope for taking the -- raising further debt. Already we will talk with now State Bank and other banks also now. Once we have now got the investment grade rating, now a lot of other banks should also open up. Probably we are approaching -- we are forwarding for a couple of more banks both in the private and the public sector and we should restart from there. Even after the meeting, I have a meeting with the General Manager of State Bank at 6:00 after this con call and went to State Bank, meeting with the GM.

So in terms of -- as you mentioned when you said about revenue breakup, you said there's a lot of cross-sell income. How should we look at when we look at like the revenue breakup going forward in terms of the mix? Like I have tracked it historically, we have around 49 -- around 50-50 mix between interest income and fee-based income. Going forward, how do you see this split going? And like will it always remain at these levels with the growth rates that you have projected as an answer to the previous question?

Also going forward, we actually expect that EWA's profitability will increase to anything between 6% to 7%. So that would be our target going forward as all the segments increase grow together rather. And the cross-sell is again then booked as a processing fee or interest given the status of the loan, whether we have financed it on our own books or we sourced it to other banks.

Right. But in terms of our aspiration and growth, do you think that then the interest income would become a larger share in terms of the mix? Would it still be 50-50 or we would have like a 70-30 kind of a mix?

So again, as we mentioned, we're trying to grow both our segments, right? So if you say interest income becomes 70%, my processing fee becomes close to 30% then. So again, that means my syndication business is not growing, right, which is [indiscernible] for us.

So we think of it us

Both of them growing both. Correct. Correct. I think the ideal mix here would be about [ 46%, 46% for both and another 8% ] for EWA.

The next question comes from the line of Ankit, an Individual Investor.

Yes. My question was on the follow-up question on the NPA. What went wrong with the company? And like was it outstanding for a single month, the entire INR 26 lakh.

I just explained that. So since it is an EWA -- since it is an EWA product, this was disbursal that was done in one particular month. And when that particular -- whatever that we have disbursed, they could not pay on the required due date in the following months, the limits were paused for them. They had some -- they had some internal operational issues and which led to some financial crisis. And they kind of told us in advance that they will take about two to three months to fix that up. So given that it is a very credible corporate and which has got some known names on their board, they took some time to do an internal reshuffling and internal rejig of their processes and their management. And as committed by them, once they are able to stabilize their processes completely, they started to pay us. So out of INR 26 lakhs, which is due, INR 17 lakhs has already been received and the remaining INR 9 lakhs is expected to come any time in February.

So like they are not paying salaries even to their employees?

They are paying salaries.

I think they are paying their salaries also. [Foreign Language].

Like I said that they had a temporary issue, which they had to sort. And so the organization is running well. It is still running. The employees are getting paid. This is a bulk payment, which the corporate was supposed to do post deduction from the salaries of the employees. This is what is going to be coming to us now. So we no longer kind of do any more disbursements to the organization.

Yes, that's correct. But like my question was on that EWA model because if they are paying a salary, if they have money to pay the salary to the employees, then they need to first clear up the EWA loan, right? So if they -- in the case they are not paying salary, it's fine. If they are paying salaries and they are saying, we will block this EWA loan payment, that is not

Ankit, let me just -- let me just answer it in a slightly different way. When you do a lending business, we are in the business of taking calculated risk. And during the journey with any of the corporates or with the employee or with any individual lender, there can be opportunities, where there is an inability to pay or there is inability to pay because of a temporary hiccup. So I'm sure that during that particular period, they did have an issue in doing the full payment to their employees as well. According, we are in constant touch with them. They have already confirmed to us about the reorganization and getting the organization back on track. So my intent is, as a lender, I look at two things. One, can I proactively ensure that I don't lose more money and that we are able to do. As soon as there was a delay of more than five days and after talking to them, we understood their current situation, we blocked any further disbursals. The second thing is my capability to be able to collect the overdue money. Now since the group is renowned and they have intent to pay, they just asked us that they will take some time to make the complete payment. So that is how it is going.

So like can you briefly tell what is the current EWA run rate monthly and like where are we going in this financial year?

Also as mentioned earlier, so last month, we did about INR 8 crores in disbursements in EWA. And by the end of this financial year, that is by March '26, we should be anywhere around INR 11.5 crores to INR 12 crores.

And with the -- last question, with the gold loan increasing with the value increase, so like would you focus more on gold loan as well or we are

So we are focused -- our mortgage business is also doing pretty well. Our mortgage syndication business has also picked up well. So all the three lines, we are focused on all the three lines. Some quarters, one particular product better than the other 2 products that will keep on changing.

And sir, I have been following the company

So Ankit, we are looking at -- Ankit, we are looking at -- so we are looking a steady growth in the top line as well as maintaining a healthy bottom line. See we are on track for both. If you look at for the last seven, eight quarters, we are steadily growing our top line as well as the bottom line. Even in this turbulent market, thanks to the entire management team and all my colleagues, they have maintained a steady growth both as the top line as well as the bottom line.

Yes. I have been following the company, so like when we were at INR 4 crore PAT, there was a discussion on the future outlook like around 8x to 10x. Then next year, we did INR 9 crores, right? And this year, we are a bit less on track? Or are we still on that path to reach 8x, 10x.

[indiscernible] if you look at, we already done top line of [ INR 31 crores ] for the first nine months. So and EPS also has -- EPS also crossed [ INR 3 ]. And I think we should be crossing [ INR 4 ] in any -- this number. Full year, we should be crossing [ INR 4-plus ]. See, it's very important, see we should -- we keep on delinquencies in control. We did not get [ disbursed ] in this particular market.

So like do you see headwinds to grow or like because of a constrained like growth or like are we not in a

Come again. Come again, please.

Like macroenvironment.

Come again. [indiscernible] properly. Can you speak a bit loudly, please.

So like we are looking at growth and while controlling NPA, right? So is it -- we are not in a good overall environment to grow or are we just keeping additional sets.

See the market is [ more than ] turbulent. We have to be very careful, while onboarding any clients. As I told you last month, there was a lot of rejections. Hello? Last month, there were a -- last quarter, there were lot of rejections. So we have to keep it [indiscernible]. In our kind of business, I think the bottom line is much more important than growing the top line. Top line growth [indiscernible]. [Foreign Language] but to collect that money is -- [ RBI ] is collecting that money. I think Gurmeet has got disconnected.

Right. We -- hold a second.

Can you take that again. I think she got disconnected.

No, no, Yrs, I'm on.

No, no. I think [indiscernible].

Yes, yes, I'm getting her. I'm getting her.

Yes. [Foreign Language] both in top line, ,as well as bottom line. But in this particular suite of -- I'm on in this line for the last 30 years, one thing I have learned not to run in this particular market. [Foreign Language] our benchmark I have already set in the earlier con calls also we want to make -- grow our company a bit like what Kotak and HDFC have done. We have been growing steadily keeping the very tight control on the NPAs and the portfolio [indiscernible]. [Foreign Language] And we look at it asset-light model [Foreign Language] next month, w receive our payments back and this is a huge scope. If you look at worldwide EWA companies [Foreign Language] there's no reason why we should not grow in India. [Foreign Language] people don't even okay this kind of product in the market. When somebody else third person has been part of your salary.

Yes. In the [indiscernible], I think there is a weekly salary concept as well. So India is, I think, a bit picking up for this EWA thing.

Yes. See U.S. they pay salary after every two weeks. Here we get once in a month. [Foreign Language] in the presentation, employees were shocked [Foreign Language] [Audio GAP] to the extent of [ 20%, 30% ].

Ankit, are you there on the call.

Yes, yes.

Yes. Hope you got your answers.

[indiscernible] Gurmeet is here now.

She is there. The next question comes from the line of [indiscernible].