SGFIN - SG Finserve

📊 NSE: SGFIN 🏢 Non Banking Financial Company (NBFC) 📅 Last Updated: 11/13/2025 15:25

💰 Financial Performance

Revenue Growth by Segment

Operating Income for H1 FY26 reached INR 142.31 Cr, representing a 91% YoY growth from INR 74.43 Cr in H1 FY25. On a quarterly basis, Operating Income grew 11% from INR 67.59 Cr in Q1 FY26 to INR 74.72 Cr in Q2 FY26. Growth is driven by the expansion of the loan book across core segments: Building Materials, Automobiles, and IT Peripherals.

Geographic Revenue Split

The loan book is geographically distributed as follows: South (41%), North (28%), West (26%), and East (5%). The high concentration in the South (INR 1,180 Cr of AUM) reflects strong anchor relationships in that region's industrial hubs.

Profitability Margins

Net Interest Margin (NIM) stood at 6.4% in H1 FY26, moderating from 8.8% in FY24 due to the base effect of a rapidly scaling loan book. Return on Average Managed Assets (RoA) was 3.9% and Return on Average Net Worth (RoNW) was 10.1% for H1 FY26. Profit After Tax (PAT) grew 58% YoY to INR 52.92 Cr in H1 FY26.

EBITDA Margin

Net Interest Income (NII) for H1 FY26 was INR 87.18 Cr, a 40% increase from INR 62.18 Cr in H1 FY25. Core profitability is supported by a low cost-to-income ratio of approximately 70 basis points, which management expects to reduce to 55-60 basis points over the next two years through digital automation.

Capital Expenditure

Not disclosed in available documents as the company is an NBFC; however, promoters have infused INR 822.5 Cr of equity since inception, including INR 112.5 Cr in October 2024, to support loan book expansion.

Credit Rating & Borrowing

The company holds an [ICRA]A1+ rating for its commercial paper and [ICRA]AA(CE) (Stable) for bank facilities/NCDs, backed by a corporate guarantee from SGHPL. Gearing increased to 1.8x as of September 30, 2025, from 1.4x in March 2025, as the company leverages its balance sheet to grow AUM.

⚙️ Operational Drivers

Raw Materials

As a financial services entity, the primary 'raw material' is capital (debt and equity). Equity capital stands at INR 1,071 Cr as of Q2 FY26. Debt is sourced via bank facilities and NCDs.

Import Sources

Not applicable for a financial services company.

Key Suppliers

Not applicable; however, the company relies on 'Anchors' like Saint Gobain, Somany, and AATL to provide the ecosystem for dealer and vendor financing.

Capacity Expansion

Current Assets Under Management (AUM) is INR 2,878 Cr as of September 30, 2025. The company has a stated goal to expand this capacity to INR 6,000 Cr by FY27, representing a planned 108% increase in lending capacity.

Raw Material Costs

Cost of funds is partially mitigated by a corporate guarantee from SGHPL, which allows for better borrowing rates. Interest expenses are managed to maintain a NIM of 6.4%.

Manufacturing Efficiency

Operational efficiency is driven by a 100% digital platform that automates disbursement of invoices received directly from Anchor ERP systems, reducing manual errors and processing time.

Logistics & Distribution

The company operates through 25 locations across India, including major hubs like Mumbai, Bengaluru, and Delhi/NCR, to facilitate MSME outreach.

📈 Strategic Growth

Expected Growth Rate

10%

Growth Strategy

The company targets 10% QoQ earnings growth by expanding its MSME customer base (currently 1,000+) and increasing AUM to INR 6,000 Cr by FY27. Strategy includes a transition from traditional CC/OD facilities to end-use-backed supply chain limits, leveraging a 100% digital platform for automated disbursements and AI-driven credit monitoring.

Products & Services

Supply Chain Finance solutions including Dealer Financing, Vendor Financing, and MSME working capital loans.

Brand Portfolio

SG Finserve.

New Products/Services

Launched a 'Customer Mobile App' for Android to provide real-time loan access. Developing an AI-driven Monitoring Tool expected to be live by December 31, 2025, to enhance credit oversight.

Market Expansion

Expanding physical presence across 25 locations to support digital sourcing, targeting a pan-India MSME footprint.

Strategic Alliances

Maintains 'Stop Supply' arrangements with major corporate anchors such as Saint Gobain and Somany to secure the credit cycle.

🌍 External Factors

Industry Trends

The industry is seeing a shift from informal credit and traditional CC/OD facilities toward structured Supply Chain Finance (SCF). SCF is growing as it unlocks working capital for MSMEs and builds vendor confidence through faster payments.

Competitive Landscape

Faces competition from other NBFCs and Fintechs entering the SCF space, leading to potential yield compression in high-quality anchor programs.

Competitive Moat

Moat is built on a 100% digital integration with Anchor ERP systems and 'Stop Supply' legal frameworks. This creates high switching costs for dealers and provides a proprietary data advantage for credit scoring.

Macro Economic Sensitivity

Highly sensitive to MSME credit cycles and industrial production in the Automobile and Building Material sectors.

Consumer Behavior

Shift toward digital-first financial services among MSMEs, supporting SG Finserve's automated lending model.

Geopolitical Risks

Indirect exposure through supply chain disruptions for anchors (e.g., IT peripherals or auto parts) which could affect borrowers' ability to repay.

⚖️ Regulatory & Governance

Industry Regulations

Subject to RBI regulations for NBFCs. The company recently pruned operations and restarted in August 2024 to comply with changes in NBFC classification requirements.

Environmental Compliance

Not disclosed; company has low direct environmental impact as a service provider.

Taxation Policy Impact

Effective tax rate is approximately 25% (based on PBT of INR 37.8 Cr and PAT of INR 28.4 Cr in Q2 FY26).

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the limited track record of operations (restarted Aug 2024) and the ability to maintain asset quality (GNPAs < 3%) as the book scales to INR 6,000 Cr.