Whalesbook
📉 The Financial Deep Dive
SBFC Finance presented a robust Q3 FY'26 performance, with Assets Under Management (AUM) growing a significant 29% year-on-year to INR 10,478 crore as of December 31, 2025, and 5% quarter-on-quarter. Profit After Tax (PAT) saw a substantial 34% YoY increase to INR 118 crore, with an 8% QoQ growth. The Gross Non-Performing Asset (GNPA) ratio remained stable at 2.71%, supported by a Provision Coverage Ratio (PCR) of 46.2%.
The Net Interest Spread improved to 9.04%, a 54 basis points YoY expansion, fueled by a yield of 17.78% and a cost of borrowing of 8.74% (down 57 bps YoY). The Return on Average Tangible Equity (RoTaTE) edged up to 14.56% in Q3 FY'26 from 14.09% in Q2 FY'26. The company maintained a healthy Capital Adequacy Ratio (CAR) of 31.7%. The cost-to-income ratio stood at 35%, with a management target to reduce operating costs by 50 basis points for FY'26.
A one-time impact of INR 2.24 crore from the new wage code was reported, which was offset by a routine expenditure reversal.
🎤 The Grill
Management commentary highlighted prevalent macroeconomic trends, anticipating hardening interest rates due to increased government borrowing and monetary policy transmission issues. Concerns were also raised regarding rising household debt, which is growing at twice the rate of financial asset creation, and a tendency for loans to be used for consumption over asset creation. Despite these headwinds, the company reaffirmed its guidance for 5% to 7% QoQ AUM growth for the end of FY'26. However, a note of caution was sounded regarding disbursement momentum, particularly in Southern and Eastern markets, attributed to 'amber' bureau scores leading to tightened filters and paused disbursals, though Q4 is expected to show improvement.
A significant leadership change was announced: MD & CEO Aseem Dhru will transition to Non-Executive Vice Chairman, with Mahesh Dayani assuming leadership.
🚩 Risks & Outlook
Key risks include the potential impact of macroeconomic factors such as rising interest rates and increasing household debt on loan demand and asset quality. Execution risks related to disbursement momentum in specific regions due to bureau score issues are also present. The leadership transition marks a new phase for the company.
The outlook remains focused on maintaining healthy spreads, enhancing operational efficiency to achieve the cost-to-income ratio target, and diversifying funding sources. Efforts are underway to improve ROE towards the 15% milestone. The company is targeting approximately 20% of its origination from co-origination deals, leveraging its expertise in Tier 2 and Tier 3 locations for the SME segment, where the average ticket size was INR 10 lakhs.