In a big thumbs up to India’s non-banking financial companies (NBFCs), Madhusudan Kela has increased his stake in IndoStar Capital Finance by 100% to INR 203.8 crore and has also invested INR 38.3 crore in SG Finserve for the first time. This move shows Kela is optimistic about the revival and growth of India’s credit ecosystem, especially in vehicle finance and small business lending.
This repositioning, as per the latest shareholding data for March 2025, indicates Kela is back in the mid-tier NBFC space which has been quietly transforming with improving asset quality, regulatory clarity and patient capital.
A Closer Look at IndoStar Capital’s Resurgence
IndoStar Capital Finance is a middle-layer NBFC registered with the Reserve Bank of India. The company primarily engages in used and new commercial vehicle financing and SME lending, with a subsidiary focus on housing finance through Niwas Housing Finance (formerly IndoStar Home Finance).
Kela’s increased stake in IndoStar comes at a pivotal moment for the lender. The company’s FY25 performance marks a robust turnaround:
- Consolidated PAT for FY25: INR 120.5 crore, up 64% YoY
- AUM: INR 11,053 crore, up 26% YoY
- Disbursements (CV + HFC): INR 6,374 crore, up 25% YoY
- Capital Adequacy (Standalone): A strong 28.5%, ensuring headroom for growth
- Gross Stage 3 Assets (ICF): Reduced to 4.52% from over 6% in previous periods
Kela’s conviction appears rooted not just in growth metrics, but in structural moves being made by IndoStar. The company has completed multiple rounds of stressed asset sales (INR 90.6 crore in March 2025, INR 174 crore in Dec 2024), thus cleaning up its balance sheet significantly. In parallel, strategic investments—such as INR 205 crore raised via warrants to promoter entity BCP V—have fortified its liquidity base.
Further, IndoStar’s decision to sell its housing finance arm (Niwas) to BPEA EQT’s Witkopeend BV for INR 1,750 crore, along with a planned infusion of INR 500 crore into Niwas, provides a sharp focus on IndoStar’s core strength: vehicle and SME lending.
“This transaction represents an important strategic move for IndoStar as we focus on driving accelerated growth and value creation in our core verticals,” noted Chairman Bobby Parikh.
A Historical Bet That Is Maturing
When IndoStar debuted on the bourses in May 2018, priced at INR 572 per share, the company was largely seen as a corporate-focused lender with niche SME operations. Fast forward to 2025, the transformation is evident—over 90% of AUM is now focused on retail verticals, especially used commercial vehicle loans and affordable housing.
This retail pivot is paying dividends. For instance, the vehicle finance (VF) AUM alone stood at INR 7,401 crore as of Q4 FY25, with Niwas Housing Finance reporting INR 3,091 crore in AUM. Despite a temporary dip in disbursements due to sectoral liquidity pressures, the underlying asset quality and operational profitability remain strong.
Why the NBFC Sector Is Back in Focus
Kela’s investment in SG Finserve, a relatively new entrant in his portfolio with a INR 38.3 crore holding, further reinforces the narrative of a broader thematic play on NBFCs. India’s NBFCs, particularly those servicing underserved segments such as rural transporters, MSMEs, and affordable housing seekers, have staged a credible comeback post-COVID and IL&FS-related disruptions.
Key tailwinds supporting this resurgence include:
- Favourable policy environment: Government focus on financial inclusion, PMAY for affordable housing, and credit guarantee schemes for MSMEs
- Shift in consumer behavior: Strong rural demand and migration from informal credit sources
- Tech-driven underwriting: Data analytics and fintech partnerships improving risk assessment in the used vehicle and SME segments
- Strong institutional interest: PE funds like EQT and Brookfield backing mid-sized NBFCs for long-term returns
Valuation and Market Standing
As of 2 May 2025, IndoStar Capital’s stock trades around INR 300 per share, reflecting a healthy rally from 52-week lows of INR 188 per share. The company is valued at a market cap of INR 4,084 crore, with a P/E ratio of 33.81x based on trailing EPS of INR 8.86.
Analysts tracking the stock indicate further upside potential as the company executes its focused retail lending strategy and redeploys capital unlocked from the Niwas deal.
Conclusion
With over 25 years of market experience, Madhusudan Kela has rarely taken positions that do not reflect long-term conviction. His decision to double down on IndoStar and simultaneously initiate a stake in SG Finserve is a clear signal of renewed confidence in India’s lending institutions—particularly those playing in the rural and semi-urban segments with scalable models.
As NBFCs increasingly bridge the credit gap left by traditional banks, and as regulatory frameworks mature, the sector stands on the cusp of a new growth phase. If IndoStar’s current momentum is any indication, Kela’s bullishness may be well placed.