SBFC Finance surges 66% on debut: Should you book profits or hold the stock?

SBFC Finance surges 66% after debut.

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26 Aug, 2025 12:21

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SBFC Finance, an MSME-focussed non-banking finance company, made a healthy debut, despite weakness and consolidation in equity markets, on August 16.

Most experts advised holding the stock for the long term in view of the potential in the MSME sector on the back of the government's Make-in-India initiative, the Atmanirbhar Bharat mission, robust business model, strong financial performance, and stable asset quality. They advised partial profit-booking in case someone wants to ride the rally.

The first day first trade in the stock began at Rs 82 on the NSE, up nearly 44 percent over the issue price of Rs 57, which was largely on expected lines. Analysts were expecting a 40 percent listing premium.

The stock climbed up to Rs 94.60 (up 66 percent) intraday. At 12:19pm, it was trading with 62.46 percent gains at Rs 92.60, with a volume of 16.8 crore shares, while the trading price on the BSE was Rs 92.72, with volume 91.90 lakh shares.

"We advise investors to remain invested for the long term as NBFCs are gaining importance in the financial sector ecosystem of late and the prospects of the company growing exponentially remains intact," Shreyansh Shah, research analyst at StoxBox said.

He believes the market participants seem to be banking upon the management's vast experience, an HDFC background and an in-house sales team. "The lender has a strategic focus on diversifying its loan portfolio across states and we remain comfortable on the credit profiling and corporate governance front," he said.

The professionally managed NBFC, focussing more on MSME loans with over 80 percent contribution to business, is backed by the marquee institutional investors such as private equity company Clermont Group, investment bank Arpwood Group, and the Malabar Group. Gold loans segment contributed over 17 percent to its business.

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The company with operations in 120 cities across 16 states and 2 union territories with 152 branches, has recorded robust growth in the business with a 44 percent CAGR in assets under management (AUM) and 40 percent CAGR in disbursements during FY19-FY23.

At the end of March FY23, SBFC Finance had an AUM of Rs 4,943 crore, which is well diversified across India, with 31 percent in the North, 38 percent in the South, and the remaining in the West and East.

"We continue to remain optimistic on the sector and MSME-focused business model which can deliver decent ROI (return on investment) in the medium to long term. Hence, we recommend allotted investors to remain invested for the long term," Prashanth Tapse, research analyst and Senior VP - Research at Mehta Equities, said.

If investors wish to buy SBFC Finance, "I would recommend them to wait and watch for some kind of profit booking attempts post listing and look to buy around Rs 80 levels," Tapse said.

The non-deposit-taking non-banking finance company with a pan-India presence recorded a 49 percent on-year growth in net interest income at Rs 379 crore with advances growing 48 percent YoY to Rs 4,415.3 crore, and massive 132 percent increase in profit at Rs 150 crore for the year ended March FY23.

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Net interest margin declined to 9.32 percent for FY23, down from 9.39 percent for FY22, while return on assets jumped to 2.92 percent from 1.48 percent during the same period.

SBFC has seen consistent improvement in its asset quality, with the gross non-performing assets in FY23 falling 31 bps on-year to 2.43 percent, and net NPA declining 22 bps to 1.41 percent compared to previous year.

Astha Jain, senior research analyst at Hem Securities, recommended partial profit-booking in the counter and holding partial allotment for the long term as the company has diversified its pan-India presence with an extensive network to cater to target customer segment.

She believes the company has comprehensive credit assessment, underwriting and risk management framework with extensive on-ground collections infrastructure leading to maintenance of robust asset quality.

"The company has a healthy liability franchise with low cost of funds. The company has shown consistent financial performance backed by profitable growth and experienced, cycle-tested and professional management team with good corporate governance backed by marquee investors," she said.

SBFC Finance has raised Rs 1,025 crore from the public issue at Rs 57 per share, comprising a fresh issue of Rs 600 crore and an offer for sale of Rs 425 crore by Arpwood Group.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.