ICICI Securities's research report on SBFC Finance
SBFC Finance’s (SBFC) Q1FY26 financial performance stands out with RoE improving to 13.5% with RoA stable at 4.5% despite a challenging operating environment. SBFC’s ability to pre-empt the business cycles (has flagged mounting stress in MSME since Apr’24) and take course correct (shift towards high-ticket LAP, tighten credit filters) without chipping financial performance sets it apart from peers. This is evident in its RoA remaining steady at 4.5% in Q1FY26 driven by productivity gains with opex to AUM moderating to 4.55% in Q1FY26 vs. 4.57% QoQ vs. 4.74% YoY; alongside a 14bps QoQ spread expansion helped offset a marginal 10bps QoQ escalation in credit cost to 1.1% vs. 1% QoQ. Asset quality is stable with GNPL rising a mere 4bps QoQ to 2.78% while NNPL rose 6bps QoQ to 1.57%.
Outlook
We retain BUY, with an unchanged TP of INR 125, valuing the stock at 3.5x on Sep’26E BVPS.
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