Veritas Finance Limited IPO

01At a glance

What the company does — lends to micro and small businesses and self-employed people: secured rural business loans against the borrower's home, affordable home loans, used commercial-vehicle loans and unsecured working-capital loans (AP p.4).

Who pays it — 231,752 active borrowers, served from 444 branches in 10 states and one union territory at March 2026 (AP p.4).

Why it is raising money — to add ₹9,000 million to its capital base for future lending (DRHP p.124). The offer-for-sale proceeds go to the selling shareholders (AP p.1).

How fast it has grown — AUM from ₹57,238 million in FY24 to ₹91,343 million in FY26, and profit from ₹2,451 million to ₹3,304 million (AP p.9, AP p.10).

The one thing to understand — a lender whose returns are falling as it diversifies. Return on equity slipped from 12.27% in FY24 to 11.25% in FY26 as net interest margin narrowed and credit costs rose, and gross stage 3 loans rose from 1.79% to 2.48% (AP p.10).

02The business, in plain words

A small-business lender in rural India lends a few lakh rupees at a time, usually secured by the borrower's house, to shopkeepers, traders and workshop owners whom banks find hard to assess. Field staff visit, assess cash flows in person, and collect monthly instalments.

A shopkeeper in a small town needs working capital → a Veritas branch assesses the business and takes the family home as security → it lends about ₹0.5 million for several years → the borrower repays monthly.

The rural business loan had an average sanctioned ticket of ₹0.53 million and an average yield on disbursements of 21.86% in FY26 (AP p.4). The company is an NBFC in the RBI's middle layer, founded in 2015 (AP p.4).

Earnings equation: Profit ≈ AUM × (yield − cost of borrowing) − operating cost − credit cost. In FY26 the yield on average loans was 21.22%, cost of borrowing 9.21%, operating expense 7.78% and credit cost 2.58% (AP p.10).

03Where the money comes from

Source: AP p.10.

The newer products carry lower yields: 16.29% for home loans and 18.56% for vehicle loans on FY26 disbursements, against 21.86% for rural business loans (AP p.4).

04The growth record

Source: AP p.9, AP p.10.

05What the growth is made of

AUM grew 61.98%, 28.39% and 24.30% in FY24, FY25 and FY26 — slowing each year (AP p.10). Disbursements grew only 16.43% in FY26 (AP p.10). Growth came partly from AUM per branch, up from ₹149.84 million to ₹205.73 million, and partly from the shift to larger-ticket home and vehicle loans (AP p.10).

06Earnings quality

Source: AP p.10.

Bad loans have risen for two years while provision coverage has fallen (AP p.10). Its credit rating was upgraded to CARE AA- in FY26 from A+ (AP p.10).

07The balance sheet

Source: AP p.9, AP p.10.

Capital adequacy was 33.19% at March 2026, down from 41.49% two years earlier (AP p.10).

08What the money is for

Source: AP p.1, DRHP p.124.

09Who is selling

Source: AP p.1, AP p.2.

10Promoters

None. The company describes itself as professionally managed with no identifiable promoter (AP p.1). D. Arulmany, a 9.35% shareholder, is among the sellers (AP p.1, AP p.8).

11Who already owns it

Source: AP p.8.

12What changed just before the IPO

• Rating upgrade — CARE AA- in FY26 (AP p.10).
• New products — vehicle loans reached 9% of AUM within two years of launch (AP p.10).
• Credit quality — gross stage 3 at a three-year high of 2.48% (AP p.10).

13Capacity and expansion

A lender's capacity is capital and branches. The company had 444 branches and 8,329 employees at March 2026 (AP p.10). The ₹9,000 million fresh issue adds to capital (DRHP p.124).

14Market size and industry structure

India's systemic credit reached about ₹221.88 trillion in FY26, according to the CRISIL report cited in the offer document, which forecasts ₹320–330 trillion over the coming years (AP p.6). Only 15% of Indians borrowed from formal sources in 2024 (AP p.6). Those forecasts are CRISIL's, and newboard has not tested them.

15Competitive position

What the document claims, and what it rests on:

• A secured rural small-business franchise with a ₹0.53 million average ticket (AP p.4).
• Strong capital — CRAR of 33.19% (AP p.10).
• Diversification into home and vehicle loans (AP p.10).

Against that: falling margins and rising stage 3 loans (AP p.10).

16Peers the company named

The industry peer P/E comparison is on DRHP p.130; it was not read in detail. For Veritas the document gives FY26 earnings per share of ₹25.17 basic and ₹24.99 diluted and return on equity of 11.25% (AP p.9, AP p.10). No P/E is possible for the company until a price band is set.

17Risks, in plain words

• Credit quality. Stage 3 loans rose for two years (AP p.10).
• Margin pressure. Net interest margin fell from 15.83% to 14.06% (AP p.10).
• Funding. Debt to equity rose to 2.36 times (AP p.10).
• Diversification. New products carry lower yields and less seasoning (AP p.4, AP p.10).

18Litigation and regulatory matters

The litigation summary was not read in detail for this study.

19Related-party transactions

Not read in detail for this study.

20What the offer document does not say

In the sections read for this study, the document does not give:

• Stage 3 by product, in the pages read.
• State-wise concentration of the loan book.
• Why disbursement growth slowed to 16% in FY26.
• Collection efficiency.
• The price band, lot size or issue dates, which is normal at DRHP stage.

21Five questions for management

1. Which product is driving the rise in stage 3 loans?
2. Why has provision coverage fallen from 53% to 45%?
3. What share of AUM is in the largest state?
4. What return on equity does the company expect as the mix shifts to lower-yield home and vehicle loans?
5. Why is D. Arulmany, a 9.35% shareholder, offering shares, and what role does this shareholder have in the company?

2Sources and cited facts

This study was read from 2 documents the company filed. The 30 figures it cites are listed under the document each came from, with the page and the sentence as printed.