As per ICRA’s estimates, the AUM of AHFCs increased by 19% YoY in 9M FY2026 to Rs. 1,58,449 crore as on December 31, 2025. ICRA expects the AUM of AHFCs to rise by 19-21% in FY2026 and FY2027. While the asset quality indicators weakened in Q1 FY2026 because of seasonality, they remained range-bound in Q2 and Q3 FY2026 supported by controlled fresh slippages and recoveries. The effects of portfolio seasoning, however, are yet to fully materialise. Adverse impact of the disruptions caused by the West Asia conflict on borrower quality remain a monitorable and pose downside risks to asset quality performance. ICRA expects gross NPA/ stage 3 of 1.8-2.0% in FY2026 and FY2027. The profitability indicators were supported by healthy business margins, controlled credit costs and stable operating expenses in 9M FY2026. The impact of leverage, competition and seasoning on earnings remains monitorable over the medium term. ICRA expects AHFCs to report RoMA of 2.7-2.9% in FY2026 and FY2027 (compared to 2.9% in 9M FY2026).

Exhibit: Share of AHFCs in overall HFC on-book portfolio