Current market conditions are such that it is able to borrow at relatively low interest rates. Besides, the increase in the scale of lending has led to a drop in operating expenditure as a proportion of revenue. All this is leading to higher profit margins.

The loan book acquired from GE will also give a boost to interest income in the coming quarters. The return on assets of the acquired portfolio is higher than the firm’s average. Challenges to the company will be from an increase in interest rates or from higher competition, both of which can narrow spreads. As of now, neither seems a threat and rising CV sales and higher demand in the used-vehicle market will drive performance. The share is up by 17% from a month ago, but closed just 1.4% up on Monday after the results were announced. At current levels, the stock trades at around 15 times estimated earnings for the current fiscal year.

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