ICICI Securities research report on SBFC Finance
SBFC Finance (SBFC) is a direct play on ‘increasing formalisation of MSME financing,’ with its a) most diversified distribution network (presence in >15 states with no single state contributing >20% of AUM), targeting formal MSME customers (ITR is mandatory for all borrowers), b) in-house operations divided into six independent verticals, and c) highly experienced management team having the potential to drive >25% AUM growth in the near term. Further, strong focus on collection (average >1 collection person per branch) and score-card based underwriting could help credit cost remain at <100bps in the near term. We build in 36% AUM CAGR over FY23-25E with RoA / RoE at 3.8%/10.4% by FY25E.
Outlook
We initiate coverage on the stock with a BUY rating and a target price of INR 115, valuing it at 4x FY25E PBV.
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