The Chatter: IDFC, Tata Consumer, Bank of India, Lal PathLabs & More
Q1 FY27 | Edition #72
Welcome to the 72nd edition of The Chatter — a newsletter where we dig through what India’s biggest companies are saying and bring you the most interesting bits of insight, whether about the business, its sector, or the wider economy. We read every major Indian earnings call and listen to the interviews so you don’t have to.
We’re always eager to improve—please share your ideas on how else we can innovate “The Chatter” format to better serve your needs.
In this edition, we have covered 6 companies across 3 industries.
We want to experiment a bit with The Chatter format. Until now, we covered around 15 companies every week. Going forward, we'll instead publish three editions a week, with each one covering five to six companies.
The idea is that covering fewer companies in each edition means we can give you quicker and focused context on everything we cover. It would also mean each edition would be less overwhelming.
We'll experiment with this format for the next few weeks. Let us know what you think about it.
Financial Services
IDFC First Bank
Bank of India
AU Small Finance Bank
FMCG
Tata Consumer Products Limited
Dodla Dairy Limited
Healthcare
Dr. Lal PathLabs
Financial Services
IDFC First Bank | Large Cap | Private Sector Bank
IDFC First Bank is an Indian private sector bank formed by the merger of IDFC Bank and the non-banking financial company Capital First. The bank provides a full suite of retail and corporate banking services with a strong strategic focus on digital-first delivery and retail assets.
[Concall]
The CEO admits that reducing the cost-to-income ratio took longer than initially planned due to asset write-offs and foundational investments. This transparency helps investors understand why historical overhead was high and sets the stage for upcoming productivity gains.
“We have been under pressure regarding the cost-to-income ratio for several years. I admit that in the first round, I got it wrong because I thought we would fix it in five years, and we are still dealing with it in the seventh year. However, I realized some income was wiped out because we wrote off a lot of bad loans. Some cost issues also came from the fact that we were building. “
— V Vaidyanathan, MD & CEO
Improving asset quality across various loan segments has allowed the bank to lower its credit cost guidance for the fiscal year. Lower credit costs directly contribute to higher bottom-line profitability and indicate a healthy loan portfolio.
“While we pre-guided 170-180 basis points for credit cost in the previous call, we now feel we could land more around 150-160 basis points for the year. Product-wise, all asset indicators like SMA, GNPA, and NNPA are trending well.”
— Sudhanshu Jain, CFO
Management is focusing on maintaining a gap between income growth and expense growth to improve the bank’s efficiency. This ‘positive jaw’ is a critical driver for increasing operating leverage and overall shareholder returns.
“We previously discussed a 13-14% increase in opex with an 18-18.5% increase in income. If that income growth is actually 20% or 20.5%, you might see a corresponding increase in opex because we don’t want to miss market opportunities. This 450 to 500 basis point jaw opening translates to a cost-to-income reduction of about 350 basis points.”
— V Vaidyanathan, MD & CEO
While growing the corporate loan book might slightly reduce overall interest margins, it helps in achieving a more balanced and lower-risk asset mix. The long-term target of 1.7% to 1.8% ROA suggests management sees significant room for further profitability improvement.
“Corporate banking NIM is lower than retail, so more corporate booking will have an impact on overall NIM. However, we see this in totality. Our vision is for the bank’s ROA to structurally reach 1.7% to 1.8% over time.”
— V Vaidyanathan, MD & CEO
The bank expects the shift to Expected Credit Loss accounting to have a minimal impact on its capital levels. This clarity reduces investor concerns about potential capital dilution or a sudden spike in provision requirements due to regulatory changes.
“On transition, the impact on capital could be broadly neutral. Regarding the run rate, there would be a higher provision requirement, but we would get benefits from EIR implementation because sourcing opex and processing fees will be amortized. Net of these, the impact should be manageable.”
— Sudhanshu Jain, CFO
The bank currently pays a fee to meet government-mandated priority sector lending targets, which acts as a drag on profits. As the bank grows its own organic lending to these sectors, this 250 crore annual expense will eventually decrease.
“We are still a bank that is short on its PSL requirements, as we started from a DFI base and zero retail franchise. Last year, the negative drag was approximately 250 crores. We are building our organic PSL franchise—which is now over 1 lakh crore—but we will continue to buy PSLCs as needed to meet our targets.”
— V Vaidyanathan, MD & CEO
Management is working to bring the bank’s high operating costs down below the 70% threshold this year. The fact that core income is growing twice as fast as expenses is a positive sign of improving operational efficiency.
“The Q1 cost-to-income ratio was 70.7%, and our endeavor is to bring it below 70% during the course of the year. Excluding that, opex increased by 2.3% sequentially. This increase of 2.3% on a sequential basis corresponds to an increase in core income of about 4.6% on a sequential basis.”
— Sudhanshu Jain, CFO
Bank of India | Large Cap | Banking
Bank of India is a leading public sector bank in India with a significant international presence across 15 countries. It provides a wide range of banking and financial services, focusing on retail, agriculture, and MSME (RAM) lending alongside corporate banking.
[Concall]
The bank is rolling out digital-first products like instant virtual cards and video-based account opening to improve customer onboarding. This shift toward automation helps reduce operational costs and improves the overall service experience for retail clients.
“With the aim to enhance the digital convenience and seamless banking, Bank of India has now offered the virtual personalized debit card in the RuPay segment. Customers can instantly apply for and self-activate the card directly through the BOI Omni Neo mobile banking application. The bank has also operationalized the Central Video Customer Identification Process Center in Mumbai, enabling seamless end-to-end digital account opening.”
— Rajneesh Karnatak, MD and CEO
Management is maintaining its previous outlook for mid-teen growth in loans and deposits for the full fiscal year. This predictability in guidance gives investors confidence in the bank’s ability to maintain its current momentum.
“Against this backdrop, our guidance for FY27 stays unchanged. Global advances are to grow by 15-16% and global deposits by 13-14% on a year-over-year basis. Our approach will continue to be guided by balanced growth with a focus on improving our deposit mix.”
— Rajneesh Karnatak, MD and CEO
The bank has successfully reduced its ‘Special Mention Accounts,’ which are early indicators of potential stress, to a very low percentage of the total book. This downward trend suggests that credit monitoring and collection efforts are highly effective.
“As far as the SMA numbers are concerned, if you see our 5 crore and above SMA numbers, our SMA has now come down to 4,070 crores, which is only 0.52% of our standard book. This was around 4,700 crores as on March 31 and more than 7,000 crores as on June 30, 2025. As far as the SMA numbers are concerned, the collection efficiency remains intact for Bank of India.”
— Rajneesh Karnatak, MD and CEO
Bank of India is aggressively raising foreign currency deposits and expects to hit a $1.2 billion target soon. These deposits are attractive because they offer a guaranteed spread with no reserve requirements, helping to lower the bank’s overall cost of funds.
“As far as the FCNRB is concerned, we have set a target of around $1.2 billion that we will be mopping up. We have a very robust mechanism and an international presence in more than 15 countries. As far as our AD branches are concerned, those enabled to take FCNRB and NRI branches all put together are around 250 across the entire country in the 13 FGMs. Presently, we have already garnered more than $200 million of FCNRB deposits. Our target is to achieve the $1.2 billion by September 30. We are seeing this deposit coming from across the globe, whether it is the USA, Canada, four countries in Africa, Europe, the UK, East Asia, Singapore, Hong Kong, or Japan. This money is coming from across the globe and within the country from all NRI segments.
As regards leverage, we have a product providing up to 9 times leverage. We have already rolled out and are marketing that leverage product. Regarding costing, for a 3-year FCNR, we are giving 6.25%. For 3-year to 4-year FCNR terms, we are giving 6.30%, and for the 5-year, we are giving 6.50%. Presently, we are getting bulk deposits at around 7%. Even if you see the gap for the 5-year FCNR at 6.50% with the hedging cost taken care of by the RBI, we are getting a clean spread of around 50 basis points on that 5-year deposit. There is an attraction for us, as there is no CRR or SLR to be maintained on those deposits. Cost of deposits will be coming down for the bank on that account”
— Rajneesh Karnatak, MD and CEO
The gold loan portfolio is seeing rapid growth while maintaining exceptionally low default rates and strong yields. This high-growth, low-risk segment is becoming a significant contributor to the bank’s overall interest income.
“Regarding gold loans, we have a book of approximately 57,000 crores as on June 30 with a yield of more than 9%, around 9.10%. Regarding asset quality, the NPA is less than 100 crores. Our gold loan book is performing nicely and growing at around 25% on a year-over-year basis.”
— Rajneesh Karnatak, MD and CEO
Management is intentionally slowing down growth in risky, low-ticket personal loans to avoid industry-wide credit issues. By focusing only on high-quality salaried customers, the bank is prioritizing long-term portfolio stability over short-term loan volume.
“We have put guardrails on personal loans. Low-ticket personal loans and non-salaried segments were showing risk in the industry. We are concentrating more on the service sector where salaries come into Bank of India accounts with nudge mandates. This has led to some de-escalation in the personal loan book, but we are watchful to protect asset quality.”
— Rajneesh Karnatak, MD and CEO
The bank is shifting its deposit strategy toward mid-sized corporate accounts to manage costs while supporting strong loan demand. While this has slightly lowered the CASA ratio, it allows the bank to fuel credit growth without paying the high premiums required for very large bulk deposits.
“We have focused on garnering deposits in the 3 crore to 25 crore bucket, where the interest rate is finer than bulk deposits of 500-1,000 crores. Since our credit growth is robust, we have been taking bulk deposits above 3 crores to support that growth, which has pushed the CASA and retail term deposit percentages down. However, we are optimizing costs to keep NPM stable.”
— Rajneesh Karnatak, MD and CEO
AU Small Finance Bank | Mid Cap | Private Sector Bank
AU Small Finance Bank is a retail-led Indian bank that transformed from an NBFC into a scheduled commercial bank. It specializes in vehicle finance, micro-business loans, and microfinance while expanding its digital presence through AI-driven banking solutions.
[Concall]
The bank has successfully shifted almost all customer transactions to its digital platform, significantly improving its service reach. Leveraging AI for customer support helps the bank scale without a proportional increase in operating costs.
“Our digital platforms continue to scale well. With more than 90% of the bank’s transaction and service requests now being processed through AU 0101, we also rolled out an enhanced UPI payment interface on this platform during the quarter. On the customer service side, we are leveraging AI voice bots to deliver a faster and more consistent experience across 11 languages while enhancing workforce productivity.”
— Gaurav Jain, CFO
The bank has intentionally prioritized credit quality over high yields in its credit card business by reducing riskier revolving debt. While this lowers immediate interest income, it protects the bank from potential spikes in bad loans in the unsecured segment.
“Specifically on credit cards, because of the tightening of underwriting norms that we have taken roughly 18 months back, the percentage of the revolver book has come down. That is why the yield on the credit card book is a bit subdued and that is why you see the weighted average yields at those levels.”
— Gaurav Jain, CFO
Management indicates that their borrowing costs have stabilized, ending a period of rapid increases. This stability helps the bank better plan its pricing and protect its net interest margins in future quarters.
“As we have mentioned in previous quarters as well, it is always difficult to predict margins because of multiple moving parts. I do not want to give you any directional guidance on that. But what we know is that the cost of funds has effectively bottomed out, as we mentioned last quarter.”
— Gaurav Jain, CFO
The microfinance industry is seeing a disciplined recovery following new regulatory guidelines, supporting a healthy growth outlook. This improvement allows the bank to resume growth in its high-margin inclusive banking portfolio with more confidence.
“After the MFIN guidelines, the industry has reached a stage where a lot of discipline has come into the field and that is why you will see more players falling in line and positive traction. In fact, MFIN has also projected about 17-18% growth. We are just following that and it is visible on the field.”
— Vivek Tripathi, Executive Director and Chief Credit Officer
The bank expects the transition to new credit loss accounting rules (ECL) to be financially neutral due to their strong collateral and low historical losses. This reassures investors that regulatory changes won’t lead to a surprise capital drain.
“What I can tell you confidently is that the historical trends of our LGDs, especially on our core asset classes, are very low. That gives us enough comfort to say that the impact would be neutral; we do not expect a significant additional hit on the balance sheet. Closer to the end of Q3, we will be in a better position to tell you because by then we will have more working models.”
— Vivek Tripathi, Executive Director and Chief Credit Officer
The bank has begun reducing its total headcount as AI automates administrative and back-end tasks. This shift demonstrates tangible progress in using technology to drive operating leverage and long-term cost savings.
“In May, for the first month, we actually decreased our manpower compared to April. This is partly because we are not growing the back-end headcount at all. We believe operations, accounts, and finance functions are being handled by AI. As we expand in new markets and products, we might hire for front-end roles, but there is a clear benefit from AI in terms of the number of people. It also helps manage risk and build scale. It is an amazing development where AI helps with adopting and managing scale, and it even allows for more flexible work-from-home options in banking. I am very happy with how we are using AI.”
— Sanjay Agarwal, Founder MD and CEO
FMCG
Tata Consumer Products Limited | Large Cap | FMCG - Food & Beverages
Tata Consumer Products is a prominent global FMCG player with a diverse portfolio spanning tea, coffee, salt, and innovative growth categories like pulses and snacks. The company leverages a strong distribution network and the trusted Tata brand to drive premiumization and expansion in both Indian and international markets.
[Concall]
Consistent market share gains in the US consumer business are helping offset volatility in the non-branded coffee commodities sector. This highlights the strength and stability of their international branded portfolio compared to bulk sales.
“The US business delivered 7% constant currency growth with what I believe is the seventh consecutive quarter of share growth. In the non-branded business, as coffee prices came down in line with expectations, we saw it declining 7%. If I take constant currency, it was down by 10%.”
— Sunil D’Souza, Managing Director and CEO
The ‘growth’ segment has reached a critical scale, now contributing over 30% of the India business. Rapid volume growth in staples and beverages is reducing the company’s dependency on mature legacy categories.
“In terms of growth, I think this was the best-ever quarter for the growth businesses for TCP, and they now account for more than one-third of the India business. Sampann grew 58%, and it was broad-based volume growth. RTD revenue was up 41% with robust volume growth.”
— Sunil D’Souza, Managing Director and CEO
The company is targeting niche, high-trust categories rather than competing in the mass edible oil market. This focus on premium segments allows them to maintain better margins while avoiding low-differentiation price wars.
“We decided to get into cold-pressed oils because we saw a consumer trust deficit regarding whether oils were refined or cold-pressed. Putting the Tata brand name on it worked well, and we figured we could drive growth with margins. In the base edible oil segment, our current hypothesis is that we do not have the full capability to play there, and we would struggle to find differentiators since the trust deficit is not as strong.”
— Sunil D’Souza, Managing Director and CEO
Input costs for tea are rising, particularly at the lower end of the market. Investors should monitor how this affects the company’s margin profile as they enter the peak buying season.
“Overall, we are seeing about 7-10% inflation for now, but the peak cropping season has just started. Right now, the crop seems quite good in Assam. We saw inflation more at the bottom end of the portfolio. We are not yet through a significant portion of our buying.”
— Sunil D’Souza, Managing Director and CEO
The Sampann brand has achieved a massive turnaround, shifting from losses to healthy double-digit margins. This success proves the company’s ability to scale newer brands profitably through efficient operations.
“In Sampann, we moved from a negative 5% margin in 2020 to closing in on 12%. This quarter had 150-200 bps of margin expansion year-over-year. The most critical piece is operating leverage.”
— Sunil D’Souza, Managing Director and CEO
The company expects future growth to be very efficient because they don’t need to add much more staff to increase production. This means more of the revenue growth should turn into pure profit for shareholders.
“Scale leverage should kick in quickly. In terms of headcount, apart from specific injections for vending and RTD, there is no substantial increase. Our headcount is broadly stable, and we do not expect significant increases in the middle of the P&L.”
— Sunil D’Souza, Managing Director and CEO
There is a massive opportunity to grow the water business by simply improving distribution in Northern and Western India. Bridging this execution gap will likely be a key growth driver for the beverage segment.
“We have availability in probably 75% of the country, but in terms of real distribution and marketing execution, we are probably only at 40-50%. We have a long way to go. The north and west are broadly white space geographies.”
— Sunil D’Souza, Managing Director and CEO
Dodla Dairy Limited | Small Cap | Dairy Products
Dodla Dairy is a leading regional dairy player in South India with a significant international presence in Uganda and Kenya. The company operates an integrated supply chain through direct procurement from farmers to produce a wide range of milk and value-added products.
[Concall]
Management opted to maintain high procurement prices to secure future inventory despite rising supply, which squeezed immediate margins. This suggests a tactical decision to prioritize supply security over short-term earnings during a period of market volatility.
“While milk availability has improved during the quarter, procurement prices did not come down as the focus was on building up the inventory for future requirements. Our strategy is in line with the overall industry trends. These elevated procurement prices were not fully passed on to the consumers, resulting in continued near-term pressure on our profitability.”
— Dodla Sunil Reddy, Managing Director
The company achieved record value-added product sales without relying on bulk commodity markets, indicating a successful shift toward high-margin retail products. This focus on consumer-facing VAP segments helps decouple the business from the volatility of industrial milk powder prices.
“Notably, the highest ever number is achieved without any support from bulk sales for Skimmed Milk Powder (SMP) or butter, reflecting our continuous efforts and the dedication of our team towards the VAP product mix aspiration. On a like-for-like basis, excluding the bulk sales proportion, VAP delivered a solid growth of 40.6% year-on-year.”
— Dodla Sunil Reddy, Managing Director
Dodla is taking a strategic stake in Sid Farm to enter the premium direct-to-consumer dairy space. This allows the company to participate in high-growth niche markets without the high risk of building a new brand from scratch.
“The investment aligns with our core dairy business and provides exposure to the fast-growing premium and D2C dairy segment. It also offers us an opportunity to associate with and support a growing, differentiated, high-quality dairy brand.”
— Dodla Sunil Reddy, Managing Director
Profitability was impacted as the spread between procurement costs and sales prices narrowed by over 1.7 rupees per liter. This quantification highlights that operational efficiencies were offset by the deliberate lag in passing cost increases to consumers.
“To put the squeeze in context, the spread between our milk realization of 59.4 and the procurement cost of 41.3 narrowed to 18.1 per liter from 19.8 a year ago, which largely explains the margin decline from 8.2% to 5.4%. In addition to that, we witnessed some increase in our operational costs, mainly due to input cost inflation and the shift in product mix from bulk sales to liquid milk and VAP sales.”
— BVK Reddy, CEO
The investment in Sitfarm serves as a low-cost research laboratory to understand emerging D2C trends and consumer habits. This conservative approach to innovation protects the balance sheet while keeping the company prepared for future shifts in dairy consumption.
“Regarding the capital allocation to Sitfarm, it is basically for us a way to learn and keep a closer watch on how the modern high-value D2C products behave. For example, we believe that for a consumption pattern to become a habit from a fad, it will take a significantly long time. Therefore, we try to learn from these pieces rather than trying to create them on our own.”
— Dodla Sunil Reddy, Managing Director
The company expects to pivot from selling bulk commodities to buying them to meet internal demand as procurement growth remains moderate. This shift reflects strong internal consumption of raw milk for branded products rather than a surplus-driven business model.
“This year, we might have to be net buyers of commodities. We are not seeing a surge of 20-25% in procurement volumes, so we do not have much bulk sales available.”
— BVK Reddy, CEO
High utilization rates in East Africa are prompting the company to plan its next phase of capital expenditure through a new project in Uganda. This expansion underscores the Africa segment’s role as a high-growth engine for the consolidated entity.
“In Kenya, we are utilizing almost 80%, with a capacity of 1.5 lakh liters. In Uganda, we are also at full capacity as we are targeting yogurt growth. We are planning a greenfield project in Uganda.”
— BVK Reddy, CEO
Dodla is adopting a defensive stance in Southern states where subsidized cooperatives keep retail prices artificially low. By focusing on volume in new markets like Maharashtra, the company aims to balance its procurement needs with profitable growth.
“In core markets like Karnataka and Tamil Nadu, the price differential with cooperatives is significant, so we focus on maintaining market share rather than aggressive pushing unless cooperatives correct their prices. Maharashtra will primarily be a procurement and balancing operation, with local sales of about 2 lakh liters per day.”
— BVK Reddy, CEO
Healthcare
Dr. Lal PathLabs | Mid Cap | Healthcare Services
Dr. Lal PathLabs is one of India’s leading diagnostic healthcare providers, offering a comprehensive range of pathology and radiology testing services. The company operates an extensive network of laboratories and collection centers across the country to serve a diverse patient base.
[Concall]
Income per patient grew significantly due to better pricing on government contracts and a shift toward more expensive tests. This improvement in realization suggests the company is effectively high-grading its service mix.
“Revenue per patient rose to 968, up by 10% from 818 in Q1 last year. This is primarily led by a favorable change in the test and geographic mix and an increase in CGHS and ECHS prices.”
— Ved Prakash Goel, Group CFO and CEO of International Business
Government-mandated price hikes are contributing roughly 3% to the company’s total revenue growth. This tailwind is expected to support financial results for the remainder of the fiscal year.
“The CGHS and ECHS price increase is now flowing through into the system. Our assessment is that it is impacting the numbers to the tune of 2-3% at an overall company level. I think this benefit will continue for at least another two to three quarters.”
— Ved Prakash Goel, Group CFO and CEO of International Business
The company plans to hold off on any general price increases until the second half of the year. This patient approach suggests they are prioritizing volume growth and market share over immediate margin expansion.
“Right now, we have anyway indicated that we would be thinking about a price change only towards the end of the year. We will reassess then whether a pricing change is required or not.”
— Shankho Banerjee, CEO
The company is launching specialized, affordable testing packages specifically designed for rural markets rather than using their standard urban products. This targeted approach could unlock a massive and underserved patient demographic for future growth.
“The rural outreach program is not driven by Swasthfit. It is a different, more affordable rural package. The objective there is to serve the rural population, identify what kind of non-communicable diseases are prevalent there, and help that population get the benefit of quality testing.”
— Shankho Banerjee, CEO
Operations in Western India are recovering and approaching double-digit growth following a period of integration. Investors should see this as a sign that the company’s regional acquisition strategy is finally gaining traction.
“The Suburban business, which is the main driver of our West portfolio right now, is really turning around and is moving very close to double digits in terms of growth. Last quarter, we started investing into new radiology centers and a collection network through the Suburban brand.”
— Shankho Banerjee, CEO
While current growth is robust, management is being cautious about identifying a single permanent driver for the acceleration. This suggests the current uptick is broad-based across various test types and geographies.
“Aside from high CGHS pricing, we need to wait for a few more quarters to get more clarity at the test and client level before we can decipher further, as there is no other differential trigger we have identified as of now. The growth is all around.”
— Shankho Banerjee, CEO
Global expansion is viewed as a multi-year project rather than a quick source of revenue. The company is taking a deliberate approach to learn international market dynamics before committing to large-scale operations.
“The international business growth is a longer-term plan which we expect to play out over a three-to-five-year horizon. These steps are being taken to ensure we understand these markets, which include Africa, parts of the Middle East, CIS, and Southeast Asia.”
— Shankho Banerjee, CEO
The company plans to use its substantial cash reserves primarily for domestic acquisitions. This signal suggests that inorganic growth in underserved Indian cities will be a key driver for the company’s future footprint.
“One of the major utilities for cash going forward would be M&A. Geographically, within India, there are parts of the country where we are underrepresented, so we are looking for getting a play or a larger asset in a given city.”
— Ved Prakash Goel, Group CFO and CEO of International Business
Join us on WhatsApp, where we share interesting soundbites from concalls, articles, and everything else we come across throughout the day. You’ll also get notified the moment a new video or article drops, so you can read or watch it right away.
That’s it for now! Your feedback will really help shape how The Chatter evolves. Drop it down in the comments below!
Quotes in this newsletter were curated by Kashish.
Disclaimer: We’ve used AI tools in filtering and cleaning up these quotes so there maybe some mistakes. Now, if you are thinking why we are using AI, please remember that we are just a small team of 5 people running everything you see on Zerodha Markets 😬 So, all the good stuff is human and mistakes are AI.