SBFC Finance Q4 Results Review: ICICI Securities Maintains 'Buy' Rating, Hikes Target Price

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ICICI Securities Report

Q4 FY25 marks eight straight quarters of strong financial performance and effective execution at SBFC Finance Ltd. This is evident in its AUM growth outshining the guided range of 5–7% QoQ, better opex to AUM at 4.65% in FY25 versus 5.34% in FY24, and credit cost at 80–100bps as envisaged earlier, despite the operating environment being mired in tight liquidity, higher delinquencies in unsecured loans and the rising rate cycle.

With Q4 FY25 RoE at ~12%, up ~200bps since Q4 FY23, SBFC remains on track to achieve ~15% RoE by Q4 FY26. While asset quality is stable with GNPL at 2.74% versus 2.7% QoQ, increase in 1+ DPD to ~7% in Q4 FY25 versus 6.5% in Q3 FY25 versus 5.6% in Q4 FY24 raises concern over near-term asset quality.

However, management sounds confident of maintaining credit cost at 80–100bps ahead. While management highlighted that underwriting standard (lower FOIR, LTVs etc.) has been tightened owing to some stress in select customer segments and areas, it does not foresee any risk to delivering on the earlier-envisaged target of >15% RoE by Q4 FY26.

SBFC believes that its prudent lending approach since the past six–nine months would enable steady asset quality; its expanded distribution network too should bolster 5–7% QoQ growth in the near term. Thus, we retain Buy, with a revised target price of Rs 125 (versus Rs 115), as we roll over to Sep’26E BVPS, valuing the stock at 3.5x versus 4x Sep’25E BVPS.

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