Paisalo Digital

Paisalo lends money to small businesses. About 126,000 loans are outstanding, the book is ₹6,101 crore, and it charges its borrowers roughly 17% while paying about 10% for the money. The gap between those two numbers is the business.

What Paisalo does

Paisalo Digital Limited is a finance company registered with the Reserve Bank of India. It does not take deposits. It was incorporated in Agra on 5 March 1992 as S. E. Investments, where the S and the E stood for Sunil Enterprises, and took its present name in January 2018. Sunil Purushottanm Agarwal has been a director since the day it was founded.

It sells two things.

Read the last three rows together, because they are the whole company. Ninety seven percent of Paisalo's borrowers are small, and they account for less than a tenth of the money. Three thousand six hundred business borrowers hold the other nine tenths.

How the money is made

Paisalo borrows at about 10% and lends at about 17%. The roughly seven point gap, less what it spends on staff and branches and less what it loses to bad loans, is the profit. On a ₹6,101 crore book that produced ₹944 crore of income and ₹237 crore of profit in the year to March 2026.

The book is moving away from the small borrower

The micro enterprise book, the part with the street vendors and the first time borrowers, has been shrinking in absolute rupees for two years while the business loan book has grown. This is the single most important trend in the company.

Fewer borrowers, much larger loans

At the same time the number of loans on the books has collapsed. Paisalo wrote a quarter as many new loans in FY2026 as it did in FY2024, at four and a half times the size.

The company markets itself on financial inclusion and says 89% of its customers are women. Both statements are true of the people who walk into its branches. Neither is true of where the money is. When you buy this bond you are lending against 3,620 mid sized business loans.

Where it lends, and the Delhi problem

Two branches in Delhi carry 29% of the book, and 101 branches in Bihar carry 2%. That is not a map of where borrowers live. Infomerics explains it: the business loan book is "booked in the Delhi as the underwriting process is centrally done through Delhi office". The branch network sells small loans. The large loans are written in one place.

The two things people assume about this company that are not true

It is not a microfinance lender. The Deputy Managing Director said so directly in August: "we do not classify our lending as an MFI lender. We are not an MFI lender." Ninety four percent of the book is secured, at loan to value of 50% to 60%.

Co-lending is not the business. Paisalo's equity story leans on co-lending with five public sector banks, where the bank funds 80% and Paisalo keeps 20%. The arrangements are real and it gives no first loss guarantee on them. But at 31 March 2026 co-lending was ₹123 crore, or 2.01% of the book. Roughly 97.5% of what Paisalo calls assets under management is its own risk. Management has stopped counting on it, calling it an "optionality" excluded from its growth plan while it waits for the banks to finish complying with a new RBI circular.

What is real and growing is a separate business: Paisalo runs 1,496 banking counters for three public sector banks, opening accounts and handling deposits and remittances. That earns fee income and carries no credit risk, and it is where the "160 lakh customers" figure comes from. Those are people using a bank counter, not borrowers.

Three years of numbers

It is a profitable, growing, well capitalised lender. Profit has risen every year. Capital adequacy is more than twice the 15% the regulator requires. The cost of its borrowing has fallen for three years running. Nothing in this table is alarming, and most of it is good.

The rest of this page is about the things that are not in this table.

What you are actually buying

Six bonds. Four pay interest into your bank account on the tenth of every month. Two pay once a year. Every one is a promise from this company and nothing else.

Two things about this table are worth pausing on. The coupon is identical for every category of investor. Institutions, companies, wealthy individuals and small retail buyers are all offered the same rate. Most issues pay retail a little more.

Second, six series are really only four different returns. Series III returns 9.92% and Series IV returns 9.91%, at the same 36 months. Series V and Series VI both return 10.46%, at the same 60 months. The choice between them is whether you want the money monthly or yearly, not whether you get more of it.

The first public issue in thirty four years

Paisalo has raised ₹645 crore through 22 debenture issues in the last three years. Every one was a private placement, sold to banks and companies. This is the first time it has asked the public.

Its existing debentures sit on the wholesale segment of the exchange, where institutions trade in ₹1 lakh lots. There is no retail market in Paisalo paper because Paisalo has never sold a retail bond, which also means there is no price history to check this issue against.

Who does lend to it is revealing. The ten largest holders of its debentures are almost all small cooperative banks: Kangra Central Cooperative at 11.84%, Punjab State Cooperative at 9.87%, Ludhiana Central Cooperative at 8.88%. Its entire commercial paper book of ₹112 crore is held by cooperative and small finance banks, with one Maharashtra cooperative bank taking 42.71%.

Where the ₹300 crore goes

At least 75% is committed to "onward lending, financing, and for repayment of interest and principal of existing borrowings". Those are two very different activities in one sentence, and the split is not disclosed before you apply.

It matters because of what falls due. Commercial paper of ₹112 crore matures by early November. Unsecured debentures of ₹119 crore paying 12% mature in July and September. Two listed series worth ₹60 crore redeem in the autumn. Brickwork puts total repayments for the year to March 2027 at ₹809 crore, against unencumbered cash of ₹75 crore.

Of the ₹7.66 crore of issue costs, ₹5.38 crore is selling commission and ₹1.50 crore is advertising. The lead manager is paid ₹15 lakh. Nearly ninety percent of the budget is distribution.

There is no monitoring agency. The audit committee monitors the use of the money itself.

Two agencies say AA. Nobody else has an opinion, and that is not an accident.

Paisalo is rated AA with a stable outlook by Brickwork Ratings and by Infomerics. It is not rated by CRISIL, ICRA, CARE or India Ratings. Neither rating carries any guarantee or structural support. This is a plain corporate AA.

The reason no third agency has an opinion is written into the company's own loan documents.

Read it literally. If any agency rates Paisalo AA minus or below in the next five years, that is an early redemption event on the bonds being sold today. After a 45 day cure period any holder can demand repayment within 15 days.

The same construction binds the debentures already sold privately. On one set of series the issuer must maintain IVR AA and "ensure no new long-term rating below this level is assigned by any agency". On another, a downgrade costs a 50 basis point step up in coupon and a two notch cut triggers accelerated redemption.

So a below AA opinion from anyone is a contractual event on debt the company has already sold. A third rating can only safely be sought from an agency expected to also say AA. That is what the covenant does, whatever was intended by it.

One of the two AAs is five months old

Infomerics has rated Paisalo AA continuously since September 2023, with about twenty affirmations and no changes. Brickwork's involvement is new: its first ever rating of this company was on 12 March 2026, and it rated the ₹4,500 crore of bank loans on 20 April 2026, where the previous rated amount was zero. Its three year history table is blank for 2024 and 2025. Brickwork notes that it does not rate the debentures already outstanding.

Brickwork's own record is public: SEBI cancelled its registration in October 2022 and ordered it wound up, the Securities Appellate Tribunal set that aside in June 2023, and SEBI then barred it from taking new clients for six months. The Reserve Bank told regulated entities in October 2022 not to take fresh Brickwork ratings. Brickwork's own disclaimer states that Canara Bank is its "strategic partner and promoter", and its own annexure lists Canara Bank as a ₹318 crore lender to Paisalo.

Infomerics disclosed for years that a man who sat on its rating committee also sat on Paisalo's board, and recorded that he took no part in any discussion of the rating. He left Paisalo's board in July 2025. It was disclosed and it was managed. Separately, the industry report the prospectus relies on was written by Infomerics' own research arm and paid for by Paisalo.

The two agencies tell opposite stories from the same accounts

They land within one basis point of each other at December 2025 and disagree completely on where it came from. They disagree on asset quality too. Brickwork lists it as a credit risk, reporting that loans overdue more than 30 days rose from ₹99 crore to ₹166 crore in nine months. Infomerics lists it as a strength, reporting that bad loans improved. Both are right about different measures. Only Brickwork says what would trigger a downgrade: gearing above 3.0 times, net bad loans above 1.5%, or return on managed assets below 3%.

What actually protects your money

Three protections here are unusually good and worth knowing about.

You have a put the term sheet does not mention. The Put and Call row says "Not Applicable", which is true of a scheduled put. But page 57 gives holders, through the trustee, the right to demand repayment within 15 days if a covenant breaks, if the rating falls below AA, if any other agency rates it AA minus or lower, if control changes, or if a regulator restricts the business. No prepayment penalty.

There are real financial covenants, tested quarterly. Leverage must not exceed 5 times, bad loans must not exceed 5% gross or 3% net, and profit must stay positive. Breach any and the trustee can recall the money on seven days notice.

Promoter money ranks behind you. Loans from the promoter or key shareholders are subordinated to these bonds by covenant, which matters because a promoter company has lent Paisalo ₹170 crore.

That calculation is ours, and it needs its offset in the same breath. About USD 41.5 million of 7.5% convertible bonds due 2029 remain outstanding, convertible at ₹45.74 against a share price near ₹69.60. They are deep in the money and converting, with 46 lakh shares issued on conversion on 12 August. As they convert, debt becomes equity and leverage falls. Management said so on the August call: "The moment those bonds are also converted, this will also push down the leverage level." Whether the trigger is touched depends on how fast that happens.

What is going bad

Reported bad loans are 0.76%, which for this kind of lending would be remarkable. Two disclosures explain most of it.

The small ticket book is being written off at 6.41% a year. The business book is recovering money. A blended figure of 0.76% hides both.

Cover on loans already more than 90 days overdue fell from 93% to 30%. The same risk factor states in its text that this coverage "stood at 20.90%", which does not match the 30.2% its own table implies.

Where its money comes from

Three things stand out. ₹321 crore of debentures are unsecured and rated by nobody at all, at rates up to 12%. No interest rate is disclosed for any of the 54 bank facilities, anywhere in 28 pages of loan tables. And the restrictive covenants in those bank agreements run to four lines and are expressly "indicative", with nothing on change of control, change in shareholding, or further borrowing.

For a company rated AA, Paisalo funds itself expensively. Its cost of borrowing is 10.15%. Five Star Business Finance borrows at 8.80% and MAS Financial at 9.25%, both comparable secured lenders. Paying 130 basis points more than a peer is the market's own view, and it does not agree with the rating.

The people

Sunil Purushottanm Agarwal, 55, has been a director since incorporation in 1992. He holds 12.67% personally and the promoter group holds 46.72%.

His pay stands out, and it stands out well. He has taken ₹3.94 crore in each of the last three years, unchanged, against an approved entitlement of ₹5.18 crore. That is about 2% of profit. In FY2025 employee pay rose 32% while managerial pay rose 4%. Independent directors take sitting fees only. This is not a company being milked.

Santanu Agarwal, 29, is Deputy Managing Director and is the promoter's son. He was appointed at about 25, and in August the board proposed a second term to 2032, beyond his father's own term.

Three governance points follow. The chief financial officer is a voting member of the audit committee that reviews the accounts he signs, and he chairs the corporate social responsibility committee on which the managing director sits.

Internal audit does not report to the audit committee. Twenty five auditors cover 422 branches and about 5,300 outlets, reporting to the chief operating officer and then to an executive director. The committee is "informed of the significant audit findings on a quarterly basis", and the risk factor concedes "errors may repeat or compound before they are discovered and rectified".

The committee running this bond issue has no published membership. It approves the allotment date, decides the issue terms and can invest the company's treasury. Its members are named nowhere.

The pledge

About a fifth of the promoter stake is pledged, and the largest shareholder in the company is not the promoter but a promoter group company holding 21.33%.

The pledge is falling, which is good. But the way the stake was built deserves a sentence. In the June quarter the promoter group bought 4.52 crore shares across about fifty market purchases, and the company announced it as promoters raising their stake to 46.72%. The stock rose 20% that day. In the same quarter Sunil and Santanu Agarwal each went from zero pledged shares to pledging almost exactly the number they had just bought. The stated reason is a loan "for onward payment for conversion of equity warrants". On the company's own filings, that was a leveraged purchase.

Institutionally, almost nobody owns this. All mutual funds together hold 1,591 shares, which is 0.00% of the company. The only meaningful institution is SBI Life at 6.83%. Foreign investors fell from 29.45% of the permitted limit four quarters ago to 6.42%.

One more thing. A ₹6,300 crore balance sheet is audited by a small Agra firm for a statutory audit fee of ₹5.63 lakh. The previous auditor was also an Agra firm. Neither appears to have another listed client. There has been no audit qualification in any year since 2006, and the 2024 auditor change was the mandatory rotation the Reserve Bank requires, not a resignation.

In December 2025, SEBI summoned the four most senior people in the company

This is disclosed at page 22 of the Shelf Prospectus, and paraphrasing it would soften it.

SEBI had issued summons dated December 22, 2025 to certain of our Directors, including, Sunil Purushottanm Agarwal (Managing Director), Harish Singh (Executive Director), and Santanu Agarwal (Deputy Managing Director) and our Chief Secretary and Compliance Officer i.e. Manendra Singh… under the provisions of Sections 11C(3) and 11C(5) of the Securities and Exchange Board of India Act, 1992… directing their personal appearance before the investigating authority in relation to the trading activities of our Company… Pursuant to such Summon Orders, the Involved Stakeholders appeared before SEBI. While, subsequent to their appearance, there has been no order or other correspondence received from SEBI, any unfavorable outcome in relation to the matter could result in our Company or the Involved Stakeholders being subjected to action by SEBI.

Section 11C is SEBI's investigation power. Sub-section 3 compels production of documents; sub-section 5 compels personal attendance on oath. This is not a routine filing query. The managing director, the deputy managing director, an executive director who is also the chief financial officer, and the company secretary were all called in, over trading in the company's own shares.

Set against that, the Tranche I Prospectus lists among the conditions making the company eligible to run this issue:

No regulatory action is pending against the Issuer or its Promoters or Directors before SEBI or the Reserve Bank of India.

The two may be technically reconcilable. An investigation with no notice and no order is arguably not "regulatory action pending". The point is that both sentences are in the same offer, that the summons sits at page 22 of a 720 page document, and that the negative confirmation sits in the shorter one most buyers will actually open.

A fourth director holds a separate SEBI show cause notice from 2023, relating to a different company. That is pending too.

In court

Paisalo is overwhelmingly a plaintiff. It has brought 454 criminal cases. Against it there is one criminal case and, on its own disclosure, no material civil litigation at all.

Those 454 include 334 cheque bouncing cases, 75 against borrowers, and 45 police complaints against its own field managers for collecting instalments and not depositing them. The subsidiary has seven more of the same. Fifty two criminal cases against its own staff for pocketing collections, in a business still largely conducted in cash with twenty five auditors covering five thousand outlets, is a control finding rather than a litigation one.

The late fee is not a one off. Paisalo's standard clause of ₹2 per thousand per day is about 73% a year, and the Delhi High Court has twice treated it as an unenforceable penalty, in 2017 and again in 2021 when Paisalo's counsel conceded the point. Both times the courts declined to interfere with the interest rate itself, one judge holding that if the Reserve Bank has not capped commercial lending rates it would be "wholly inapposite for the courts to venture to re-write the contract".

In April 2026 the Bombay High Court dismissed a Paisalo execution petition and declared a ₹33.87 crore arbitration award unenforceable because the arbitrator had been appointed unilaterally. A Delhi commercial court set aside another award on the same ground in 2023. Paisalo's older loan agreements let it appoint the arbitrator without the borrower's consent, and that is now being tested. For balance, the Bombay High Court found for Paisalo on the same question in a different matter on 4 August 2026.

Recovery is slow and partial. Paisalo filed a ₹22.79 crore claim in one borrower's insolvency and recovered 1%. Awards from 2015 through 2018 are all still in execution, with several borrowers in liquidation.

Against the promoter personally there is one criminal complaint over a housing project at another company where he was a director; summons issued in October 2021, still pending. Against the company there is one case, a 2010 police complaint alleging forgery of borrower records, which was closed, reopened, and has been pending since 2013.

All of this sits above a disclosure threshold of ₹10.27 crore. Smaller matters were not disclosed.

Before the 2018 rename

Four things are on the record from the S. E. Investments era. A tax tribunal held in 2003 that its "hire purchase" book was really plain lending, noting the company "used to obtain from the customers blank signed documents". Its former name appeared on the Financial Intelligence Unit's list of high risk finance companies in January 2018 for not registering a money laundering compliance officer, and was gone a month later. It settled a SEBI disclosure case in 2019 for ₹16.11 lakh, having "admitted to the violation". And the courts document a high rate lending model that survived every usury challenge brought against it.

Four things we looked for and did not find matter as much. It was not on the 2017 list of 331 suspected shell companies. It was never suspended or placed under exchange surveillance. It was never downgraded or tagged as not cooperating with a rating agency. And no journalist, analyst or forensic house has ever published a critical piece on it. The rename itself has an ordinary explanation in the company's own postal ballot: S and E stood for Sunil Enterprises, and the board wanted a name reflecting digital lending.

How it is selling

The composition matters more than the headline. Institutions have taken 0.27 times their reserved slice and have not moved in three days. These are the banks, insurers and funds who can read the same documents. For paper rated AA by two agencies, that is a quiet verdict. Retail is at 0.72 times. The book is carried almost entirely by companies, trusts and partnerships, at 4.76 times.

What we still cannot tell you

• Whether the SEBI investigation opened in December 2025 has concluded. Nothing has been published either way.
• Whether the ₹1,108 crore of foreign currency debt is hedged.
• Why loans in arrears carry less provision than loans that are current, and whether coverage on the worst loans is the 20.90% the text states or the 30.2% the table implies.
• What interest rate Paisalo pays on any of its 54 bank facilities.
• Who sits on the committee running this issue.
• Whether the ₹5 lakh costs order of April 2024 was ever disclosed to the exchanges.
• The status of the writ petition against the Reserve Bank, SEBI and Paisalo.