Summary
SBFC Finance Limited - Q3 FY 2026 Earnings Call Summary Saturday, January 24, 2026, 4:00 PM
Event Participants
Executives Aseem Dhru – MD & CEO, Mahesh Dayani – Executive Director (CEO Designate), Narayan Barasia – Chief Finance Officer, Rajiv Thakker – Chief Risk Officer, Sanket Agrawal – Chief Strategy Officer
Analysts Ashish Sharma, Harshit, Nidhesh, Nischint Chawathe, Prithviraj Patil, Raghav, Ruvitash Arora, Shreya Shivani, Subhanu, Sucrit Patil
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| AUM | ₹10,478 crores | +29% YoY, +5% QoQ; 100% of book is secured by property/gold. |
| MSME AUM | ₹8,497 crores | +25% YoY, +4% QoQ; constitutes 81% of total AUM. |
| Gold Loan AUM | ₹1,954 crores | +48% YoY, +14% QoQ; growth supported by gold price appreciation. |
| Disbursements | ~₹3,000-3,100 crores | Estimated for 9M FY26; management tightened filters resulting in lower volumes. |
| GNPA | 2.71% | Remained range-bound; PCR maintained at 46.2%. |
| Credit Cost | 1.29% | Flat QoQ; management expects +/- 5-10 bps variation in Q4. |
| Cost of Borrowing | 8.74% | -22 bps QoQ, -57 bps YoY; benefits from NCD/ECB/DFI diversification. |
| Yield on AUM | 17.78% | -23 bps QoQ; decline due to shift toward higher-rated bureau customers. |
| Spread | 9.04% | Flat QoQ; +54 bps YoY showing efficient liability management. |
| Cost-to-Income | 35.0% | Improved efficiency despite adding 10 new branches this quarter. |
| ROA / ROE | 4.67% / 14.56% | ROE improved from 14.09% in Q2; targeting 15% milestone. |
Geographic & Segment Commentary
- MSME Loans: The segment represents 81% of AUM with an average ticket size of ₹10 lakhs. Management noted 85-90% of customers originate from Tier 2 and Tier 3 markets. Stress is currently concentrated in Southern and Eastern markets, leading to tightened filters (CIBIL >700).
- Gold Loans: Contributes 19% of AUM with a target to stay below 20%. Productivity is high with AUM per branch at ₹10 crores across 200 gold-offering branches. Growth this quarter was significantly aided by the “wealth effect” of rising gold prices at the bottom of the pyramid.
- Regional Performance: South India remains under pressure due to the Karnataka ordinance impact from earlier in the year. While the West and North are “green,” the South and East are still “flashing amber” in bureau data, necessitating cautious lending.
Company-Specific & Strategic Commentary
- Leadership Transition: Aseem Dhru is stepping down as MD & CEO to become Non-Executive Vice Chairman. Mahesh Dayani (currently ED) will take over the CEO baton to ensure continuity.
- Operational Efficiency: Realized a 150 bps reduction in opex over the last three years. The firm is pivoting toward AI, agentic call centers, and digital onboarding to further lower costs.
- Asset Quality Strategy: Implementation of strict CIBIL floors (>700) and avoidance of over-leveraged customers. Management noted that while individual balance sheets are weakening system-wide, SBFC is prioritizing “nothing-to-report” stability over aggressive growth.
- Liability Diversification: Successfully diversified into NCDs, ECBs, and DFI funding. Bank borrowing now constitutes 50% of the mix, down from historical highs, optimizing the cost of funds.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AUM Growth | 5% to 7% (QoQ) | Management maintains a cautious stance given macro headwinds. |
| Opex | -50 bps (Full Year) | Targeted reduction for FY26 through operating leverage and tech. |
| Credit Cost | +/- 5 to 10 bps | Expected to remain stable in Q4; FY27 guidance deferred to April. |
| Gold AUM Mix | ~20% of Portfolio | Intent to keep the mix stable despite higher gold price tailwinds. |
Risks & Constraints
| Risk | Context |
|---|---|
| Household Indebtedness | Management highlighted RBI data showing household debt growing at double the rate of asset creation. This systemic leverage is reducing approval rates for new applicants. |
| Interest Rate Volatility | CEO warned that G-Sec yields are hardening despite repo rate cuts. Higher government borrowing (~₹30 trillion) may prevent transmission of lower rates to NBFCs. |
| Regional Softness | The Southern market continues to see higher delinquency flows. Management estimates it takes 6-7 quarters total to fully repair and restore portfolios after such disturbances. |
Q&A Highlights
Asset Quality & Logins
- Question: Why have disbursement volumes declined if stress is stable? (Raghav, Ambit Capital)
- Answer: It was a conscious choice. Bureau scores in South/East are “amber.” We tightened credit filters, which naturally reduced converted volumes. (Mahesh Dayani)
Collection Leadership
- Question: What is the impact of the Chief Collection Officer’s resignation? (Raghav, Ambit Capital)
- Answer: We have a deep matrix structure with 550+ people. A successor joins in April; we anticipate no operational disturbance. (Aseem Dhru)
Opex One-offs
- Question: Did the new labor code impact costs? (Nidhesh, Investec)
- Answer: There was a one-time ₹2.24 crore impact this quarter. However, overall opex is trending down due to automated processes and higher productivity. (Narayan Barasia)
Strategy & Leverage
- Question: Are you seeing over-leveraging in MSME customers via personal loans? (Shreya Shivani, Nomura)
- Answer: Yes, we see systemic leverage rising. We now red-flag customers who borrow excessively outside after taking our loan to prevent over-extension. (Rajiv Thakker)
Key Takeaway
SBFC Finance delivered a stable Q3 FY26, characterized by a “cautious continuity” approach amidst systemic concerns over household leverage. AUM grew 29% YoY to ₹10,478 crores, supported by a strong performance in Gold Loans (+48% YoY) and steady MSME growth. Management consciously moderated disbursements by tightening CIBIL filters to >700, prioritizing asset quality over volume as household debt grows faster than asset creation. Profitability remained robust with a PAT of ₹118 crores (+34% YoY) and an improved ROE of 14.56%, driven by a 150 bps cumulative reduction in opex over three years. A significant leadership transition was announced, with Aseem Dhru moving to a Vice Chairman role and Mahesh Dayani taking the helm. SBFC enters Q4 with a strong capital adequacy of 31.7% and maintains a 5-7% QoQ growth guidance, though it remains watchful of hardening interest rates and regional stress in the South.
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