Investec kicks off coverage on SBFC Finance with 'buy' tag, sees 27% upside

Investec issued a 'buy' tag, with a target of Rs 135 on the firm's shares.

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Global broking house Investec initiated coverage on non-banking financial player SBFC Finance Ltd on its strong franchise in the secured MSME segment. Further, the non-bank achieved an impressive 40 percent AUM CAGR over the past five years with improving profitability and stable asset quality.

The brokerage issued a 'buy' tag, with a target of Rs 135 per share. This indicates an upside potential of 27 percent.

SBFC Finance's RoA and asset quality metrics are not industry leading, but they appear credible. "While financial metrics are straightforward to assess, we argue gauging long-term resilience is more complex," said Investec. The brokerage noted that SBFC’s resilience stems from:

• A leadership team who have seen various credit cycles,
• Pan-India distribution,
• Focus on secured lending,
• A prudent liability strategy (gold loans helping ALM/ well-diversified borrowing mix),
• Strong second-tier management,
• Proactive responses to credit cycles.

At 11.45 a.m., shares of the non-bank were quoting Rs 106.97, up 0.4 percent, after trimming large intraday gains.

SBFC has a pan India footprint - presence in 16 states and 2 UTs. This is unlike most NBFCs that remain regional. It thus allows SBFC to have a more predictable growth and higher scale.

Further, it has an in-house operating model for sourcing, underwriting and collection, which provides better control on operations. This should lead to better asset quality, higher customer ownership and lower balance transfer risk. The downside is higher employee dependence and reins-in scalability.

Investec, however, noted that high employee attrition and low productivity are notable challenges. There are challenges to scalability in MSME book (beyond Rs 20,000 crore) as employee productivity is low. The broking house forecasted AUM growth of 27 percent CAGR over the next 3 years with exit RoE of 15 percent or more in FY28.