SBFC Finance Targets 25-30% Annual Growth In FY26

SBFC Finance aims to maintain its assets under management (AUM) growth at 5% to 7% quarter-on-quarter (QoQ), which translates to an annual growth rate of 25% to 30%, according to the company’s Executive Director, Mahesh Dayani.

“The market's almost at Rs 3.5 lakh crore, growing at almost close to 20-21%. That means it doubles every three to four years. I don't think there's an overhang of growth. That's the reason we've always maintained we will grow at 5% to 7% QoQ, which means that you're annually growing anything between 25% and 30%,” he said during a conversation with NDTV Profit on Monday.

The company, primarily catering to underbanked segments, anticipates delinquencies and Non-Performing Assets (NPAs) to remain "range-bound”, with credit costs hovering around 1%, plus or minus ten basis points in FY26. Here, delinquency refers to a borrower’s failure to repay the loan.

“The concentration risk is limited to at best 8% to 10% in a single state. We wouldn't get stuck in an air pocket for a fairly long time,” he said, highlighting the company’s diversification across the country.

He noted that the worst possible outcome would be if the whole nation sees a shutdown, similar to the one that happened during COVID-19. Even then, delinquencies peaked at 4% to 5% and credit costs remained manageable at around 1.5%, he said.

Dayani said that in case of default, loans qualifying under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) can be resolved within 18 to 24 months. The recovery time for loans outside of SARFAESI can go up to 36 to 48 months.

SBFC Finance has a capital adequacy ratio of 35% and a return on assets (ROA) of 4.5%. The company aims to boost its return on equity (ROE) to 15% by the end of the current financial year or Q1 FY27. This can be achieved by leveraging the company’s debt-to-equity ratio from below two to three and a half without needing to raise funds for the next eight quarters, according to Dayani.

He also highlighted SBFC’s focus on maintaining lending spreads. Borrowing costs are expected to decline due to consistent rating upgrades, the top executive added.

Operating expenses (OpEx) are likely to fall by 50 basis points annually. “Last year, we reduced OpEx by almost 70 basis points, and we expect a similar trajectory this year,” he said. Combined with increased leverage, it could add 165 basis points to ROE.

He attributed SBFC Finance's relative stability to cautious measures taken early last year. At that time, the company deliberately slowed down disbursals in response to concerning credit bureau data. "We took the foot off the accelerator way back then. The numbers you see right now are largely on account of prudence in terms of the disbursals we did last year,” he said.

Shares of SBFC Finance closed 0.99% lower on the NSE at Rs 99.1 apiece on Monday, while the benchmark Nifty 50 ended 0.47% higher at 24,461.15.