SG Finserve Limited

Key Financial Performance

Q2 FY27 Financial Highlights:

  • Achieved an all-time high quarterly Profit After Tax (PAT) of ₹59 crores.
  • Loan Book (AUM) reached an all-time high of approximately ₹5,700 crores.
  • Profit Before Tax (PBT) for H1 FY27 was ₹150 crores, doubling from the corresponding H1 of the previous year.
  • Maintained Return on Assets (ROA) at more than 4.5%.
  • Cost-to-Income ratio remained below 15%.
  • Asset-to-Equity leverage improved from 2.8x to 3.7x over the last year.
  • Quarterly run rate for Return on Equity (ROE) moved up to 15% in Q2 FY27.
  • Exited the quarter with a net worth of approximately ₹1,600 crores.
  • Accumulated provisioning in the balance sheet stands at ₹25 crores, as per Indian Accounting Standards (Ind AS) and Expected Credit Loss (ECL) norms.

Operational and Business Metrics:

  • Disbursed loans of more than ₹16,000 crores in H1 FY27, translating to an annualized volume of ₹32,000 crores—a 46% year-on-year increase.
  • Maintained nil Non-Performing Assets (NPA). Collection efficiency is 99.5% month-on-month.
  • 0.5% of dues slip into 1+ Days Past Due (DPD), but are collected majority within 30 DPD and some within 60 DPD.
  • 60 DPD is zero across the entire book, including both supply chain and non-supply chain segments.
  • The company has a team strength of more than 100 people, with an annualized per-employee PAT of more than ₹2 crores.

Strategic and Business Updates

Growth Strategy and Leverage:

  • The board approved a revision of the mid-term debt-to-equity leverage target from 3x to 4x. This is expected to support AUM growth to approximately ₹11,000 crores.
  • The company maintains a 30% to 35% CAGR guidance for AUM growth and a 35% to 40% CAGR for profitability from the current base.
  • The management does not foresee an equity raise in the current financial year. Strategic considerations for future capital (e.g., CCDs, OCDs, or equity) will be evaluated based on market conditions in 2-3 years.

Product and Business Diversification:

  • Supply chain financing contributes ~70% of the AUM. The contribution from the group's ecosystem has reduced to 25%.
  • The company is powering the ecosystem of more than 60 brands in the country.
  • New business lines commercialized during the quarter:
  • Factoring: Contributes ~15% to the book. The company received the factoring license in March 2026.
  • Digital Lending: Disbursed around 10,000 loans following RBI guidelines, leveraging the LSP (Loan Service Provider) framework. The outstanding book is ₹121 crores, with a target to contribute 10% to overall AUM in the future. Safeguards include FLDG (First Loss Default Guarantee) from LSPs.
  • Loan Against Property (LAP): Just begun in Delhi NCR. Four loans disbursed with an outstanding of ₹17 crores. Ticket size is more than ₹25 lakhs and is structured as a business loan backed by hard collateral.
  • The company is among the 1% of NBFCs in India providing supply chain financing, factoring, TReDS, or digital lending products.

Sectoral Exposure:

The supply chain portfolio is diversified across sectors:

  • ~35% in Steel and Building Products
  • ~20% in Automotive
  • The remainder in varied industries including Pharma, IT, Tiles, Electricals, and Cables.

Anchor Client Acquisition:

  • Added 14 new anchor corporates in H1 FY27.
  • Target is to onboard 2 new anchor corporates per month for the next 12-18 months.
  • Current wallet share with existing 60 anchor brands is less than 5%; aim to double this to 10%.

Capital Structure and Fundraising

Borrowings and Cost of Funds:

  • Single source of borrowing is from banks and NBFCs. The company has relationships with 19 banks and NBFCs.
  • Financing is in the form of working capital, term loans, and opportunistic commercial paper issuances.
  • Cost of borrowing is approximately 8%.
  • The recent credit rating upgrade from CRISIL to 'AA-' (long-term) and 'A1+' (short-term) may positively impact future borrowing costs.

Investments and New Ventures:

  • GIFT City Subsidiary: The board approved an investment of approximately ₹48 crores to set up a wholly-owned finance company in GIFT City. It will undertake overseas supply chain financing for imports/exports of existing clients. Operationalization is subject to dual approval from RBI and IFSCA and is expected to take about a year.
  • AIF (Alternative Investment Fund): An application has been filed with SEBI for a Category III equity-based AIF. SG Finserve will act as the sponsor and generate fee income through an Asset Management Company (AMC), a wholly-owned subsidiary. No significant equity deployment from SG Finserve is planned. The launch is pending SEBI approval and team hiring.
  • Shared Services / Tech Company: A strategic, long-term investment of a 15% stake was made in a group-level shared services company focused on building an in-house AI and digital stack. The objective is to achieve cost synergies and reduce dependency on external vendors. Miniscule payments are expected in the initial year.

Forward-Looking Commentary and Guidance

Management Outlook:

  • The company is focused on sustainable, scalable, and profitable growth while maintaining strong credit quality.
  • AUM growth guidance is 30%-35% CAGR on a forward-looking basis from the current base. The management indicated that based on the current run rate, the company may achieve an AUM of ~₹7,000 crores by March 2027 (FY27 year-end).
  • The objective is to maintain key operating parameters: nil NPA, ROA >4.5%, and cost-to-income <15%.
  • The PAT guidance for the full year FY27 is at least ₹225 crores, with the potential to slightly exceed it.

Response to Regulatory Environment (RBI Draft Guidelines):

  • The management believes the company is well-prepared for the RBI's draft guidelines on revolving credit. The company's products are term-based with identifiable repayment schedules, not demand loans or overdrafts.
  • No fundamental business interruption is expected. Minor adjustments to documentation and systems for digital, real-time reporting may be required.

Question and Answer Highlights

Project Finance:

Disclosed 12 project finance accounts. None have started commercial operations as the projects were disbursed recently. Projects are expected to start in 6 to 9 months.

Asset-Liability Management:

The introduction of longer-tenor products like LAP is matched by building long-term liabilities. The overall asset-liability mismatch is positive, supported by a strong equity base of ₹1,600 crores and over ₹1,000 crores in term loans.

Digital Lending Yield:

The company maintains an overall portfolio yield of ~13% (comprising ~12.5% ROI and 50-70 bps fee income). Yield varies between 11%-15% based on risk category, security, and appetite.

Competitive Positioning:

The company operates on a coexistence model, often providing financing for the untied portion (INR10-20) of a borrower's total requirement (INR100) after they have secured INR80-90 from banks and other NBFCs.