• AUM grew 29% YoY to INR 11,270 crore as of March 2026, with 8% QoQ growth
• Added 46 branches during FY26 (highest ever), taking total branch count to 251, with plan to stabilize at 275 branches
• Gold loan AUM grew 63% YoY to INR 2,374 crore (21% of total AUM), with 22% QoQ growth driven primarily by price increases
• MSME AUM at INR 8,730 crore (79% of portfolio), growing 22% YoY and 4% QoQ
• Spreads expanded 56 bps YoY to 9.09% for the quarter, driven by 83 bps reduction in cost of borrowing to 8.52%
• OpEx reduced by 69 bps YoY to 3.93%, delivering on cumulative 161 bps reduction over three years against 150 bps guidance
• Strong capitalization with 32.8% capital adequacy ratio and leverage at only 1.9x debt-to-equity
• Maintained conservative gold loan-to-value ratios below 60% (closer to 56-57%) with average ticket sizes below INR 2.5 lakh

SBFC Finance reported strong FY26 results with 29% AUM growth to INR 11,270 crore and 31% PAT growth to INR 451 crore, while maintaining solid asset quality (GNP at 2.61%). Management remains cautiously optimistic about growth prospects in underserved MSME and gold loan segments, but expressed significant concerns about macro headwinds including inflation, rising fuel costs, potential El Nino impact, and geopolitical uncertainties that could affect their small business borrower base.

SBFC Finance delivered robust financial performance in FY26. PAT for the full year reached INR 451 crore, up 31% YoY, with Q4 PAT at INR 123 crore (30% YoY growth, 4% QoQ). Return on average AUM stood at 4.57% with ROE of 14.48% for the quarter. The yield on earning assets was 17.61% for Q4, while cost of borrowing declined sharply by 83 bps YoY to 8.52%, resulting in spreads of 9.09% (up 56 bps YoY). Pre-provisioning operating profit grew 37% despite AUM growth of 28-29%, demonstrating strong operating leverage. OpEx as percentage of AUM improved to 3.93% (down 69 bps YoY). Credit cost for the quarter was 1.38% with provisions at 1.84% (2.1x IRAC norms). The company maintains a strong balance sheet with tangible net worth of INR 3,465 crore and capital adequacy of 32.8%, providing runway to grow to INR 18,000-19,000 crore AUM over next two years without additional capital raise.

Management demonstrated a cautiously optimistic stance, balancing confidence in execution capabilities with significant macro concerns. CEO Ashim opened with extensive commentary on deteriorating macro conditions including fiscal/trade deficits, oil shocks, weak FDI/FII flows, potential El Nino impact, and risks to remittances and IT flows. He emphasized SBFC's 'anti-fragile' business model designed to handle uncertainty, stating 'we do not know where the devil call risk will arrive from, but we know that in whatever form he arrives, we have to meet him already prepared.' Management highlighted strong execution track record, delivering on all guidance metrics over three years. Mahesh emphasized the long-term opportunity, noting presence in only 25% of districts in operating states with significant runway for market share gains. The tone was measured and risk-aware rather than bullish, with repeated emphasis on controlling controllables (OpEx, distribution quality) while being prepared for external shocks. Management stressed their direct origination model advantage and deep market penetration strategy over next 2-3 years.

Management outlined substantial macro and operational headwinds. Key macro risks include: rising inflation from fuel costs and imported inflation due to weakening currency (described as 'certainty'), potential El Nino affecting monsoon-dependent economy, rising interest rates from demand-supply imbalances, geopolitical tensions affecting Gulf remittances, and AI disruption risks to IT sector flows. Management noted 'in a softening demand environment due to income growth not keeping pace, every company commentary will be about squeezing costs - and corporate cost is MSME revenue,' directly impacting their borrower base. Asset quality concerns emerged with acknowledgment of over-leveraging at household level in certain pockets, leading to conscious slowdown in some East and North markets. Credit risk remains elevated with borrowers vulnerable to external shocks ranging from gas cylinder shortages to medical emergencies. Operational challenges include managing 46 new branches added in last year (mostly Q4), requiring time to stabilize and generate returns. Stage 2 provisions increased from 6% to 16% following ECL model refresh, indicating heightened early warning signals. Gold loan growth is primarily price-driven (not volume), creating sustainability questions if prices decline or stabilize.

Revenue Outlook: Quarterly AUM growth guidance maintained at 5-7%; expects to potentially double the book over next 3-3.5 years; monthly disbursements expected around INR 300 crore

Margin Outlook: Spreads expected to hold at current 9% level; OpEx to decline 20-25 bps through FY27; credit cost expected to remain range-bound at 1.38% with marginal 5 bps benefit possible

Key Targets:

• Stabilize at 275 branches during FY27
• Gold loan share to gradually increase from 21% to closer to 25% of AUM
• Co-origination to remain at 16% of disbursals and 18-19% of AUM
• Maintain MSME-gold mix at 75-25%
• No capital raise needed for next 2 years (can grow to INR 18,000-19,000 crore AUM)

The Q&A session revealed analyst concerns primarily focused on three areas: (1) sustainability of growth given weak disbursement volumes and heavy reliance on gold price appreciation, (2) efficiency metrics showing declining productivity per employee and per branch, and (3) macro risk impact on the MSME borrower segment. Analysts probed the branch expansion strategy, questioning why the company is adding capacity when volumes are declining. Management responses emphasized the long-term view, maintaining that slowdowns in certain markets were conscious decisions based on leverage concerns, not demand issues. They stressed controlling controllables (OpEx, distribution quality) while preparing for uncertain external environment. The DSA/connector questioning suggested analyst skepticism about achieving growth targets with only direct channels. Management pushed back confidently, citing adequate distribution and the INR 4 lakh crore TAM opportunity. On gold loans, management candidly acknowledged price-driven growth but expressed confidence in volume pickup from new branches. Overall, management adopted a notably defensive posture compared to typical NBFC calls, spending significant time on risk scenarios rather than opportunity messaging, though they maintained guidance unchanged. The detailed macro risk commentary in opening remarks set a cautious tone that persisted throughout, with management appearing more focused on demonstrating resilience and preparation than exciting investors about growth prospects.