ESAF Small Finance Bank to sell bad loans worth ₹735 crore to asset reconstruction company; stock jumps over 11%

Shares of ESAF Small Finance Bank rallied over 11% in early trade on Thursday after its board gave its nod to sell its non-performing assets (NPAs) and technically written-off loans worth ₹735.18 crore. In an exchange filing last evening, the small finance bank said that its board had approved a proposal for the sale of NPAs and written-off loans to an asset reconstruction company (ARC).

The loan pool includes ₹362.43 crore in NPAs and ₹372.75 crore in technically written-off accounts. The bank has already made provisions covering 90.15% of the total loan pool, ESAF Small Finance Bank said in a BSE filing.

“The board of directors has authorised the asset sale committee of executives to complete the procedural requirement with respect to the sale of NPAs and technically written-off loans to the ARC,” the release noted. 

Cheering the news, shares of ESAF Small Finance Bank surged by as much as 11.28% to ₹33.83 on the BSE, while its market capitalisation climbed to ₹1,700 crore. The counter saw strong volumes as more than 900,000 shares changed hands over the counter compared to its two-week average of 94,000 shares.

The share price of ESAF Small Finance Bank touched its 52-week high of ₹57.11 on June 19, 2024, and a 52-week low of ₹24.35 on March 27, 2025. The bank's stock has rebounded 39% in less than three months from its 52-week low, while it lost over 23% in calendar year 2025. The small-cap stock has fallen nearly 42% in a year, while it added 7.5% in a month.

For the fourth quarter ended March 31, 2025, ESAF Small Finance Bank reported a net loss of ₹183.19 crore against a net profit of ₹43.35 crore during the corresponding period last year. Net interest income (NII) dropped to ₹436 crore from ₹591 crore in Q4FY24, due to systemic stress in the microlending book. Net NPAs remained stable at 2.9%, while the provision coverage ratio (PCR) improved to 80.5% as of March 31, 2025, as against 78.6% in the trailing quarter. 

The bank in its earnings report mentioned that it faced the macro-level stress primarily in its legacy microloan portfolio. In response, it set aside ₹332 crore in provisions during Q4 FY25, including ₹131 crore over and above the policy norm. It did a total write-off of ₹345 crore in March quarter of FY25.

Earlier this week, Maruti Suzuki India partnered with ESAF Small Finance Bank to offer retail financing solutions for new cars, used cars, and commercial vehicles. The two companied signed deal to focus on offering easy and flexible finance options tailored especially for first-time buyers. The partnership will leverage the combined network of Maruti Suzuki and ESAF Small Finance Bank across Tier II and Tier III cities to make vehicle ownership more accessible and convenient for a wider segment of customers.

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