SGFIN Q2 FY26 earnings call.
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SG Finserve reported Q2 FY26 loan book growth of 15% QoQ to ₹2,878 crore, with 14% PBT and 16% net profit growth. The company maintained its zero NPA record across 36 months and ₹52,000 crore cumulative disbursements. However, management revised FY26 PAT guidance sharply downward to ₹120-125 crore from the earlier ₹150 crore (original ₹200 crore PBT guidance), citing macro slowdown impacting anchor customers across building materials, auto, and IT sectors. Exit AUM for FY26 is guided at ₹3,500 crore with ₹6,000 crore targeted for FY27. Major leadership transition underway with CEO Sorab Dawan and CFO Sahil Sikka departing, replaced by Vin Gupta (from Yes Bank) and Sanjay respectively. Strategic yield reduction was taken for Tata Motors and Mahindra & Mahindra anchors, with management targeting 12.25-12.45% steady-state yields. RoE currently at 9% with path to 12-13% via leverage increase from 1:2 to 1:3. Key risk: consecutive guidance cuts and simultaneous senior management departure could undermine investor confidence.
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Guidance to track
- Management cited macro slowdown impacting anchor customers who have reduced their own revenue guidance. Guidance revised from original ₹200 crore PBT (₹150 crore PAT) to ₹120-125 crore PAT for full year FY26.
- Full-year PBT of ₹250 crore for FY27 remains intact, implying approximately ₹190 crore PAT. This will require acceleration in loan book growth to ₹6,000 crore from current ₹2,878 crore.
- Q4 FY26 exit loan book guided at ₹3,500 crore with potential upside to ₹4,000 crore if economy performs better in final quarter. Q4 quarterly profit expected at ₹35 crore (plus/minus).
- Management targets 12.25-12.45% yield as steady state, up from current 11.5% (Q2 FY26 reduced from 12.4% in Q1 due to new anchor pricing). Expansion via deeper penetration and retailer financing.
Risks flagged
- Both CEO Sorab Dawan and CFO Sahil Sikka announced departure on the same day. While management stated transition is smooth with 60-day handover, dual leadership change creates execution risk. Analyst raised this concern directly.
- FY26 PAT guidance has been reduced from ₹150 crore to ₹120-125 crore. An analyst pointed out contradictory statements from management regarding whether original numbers were full-year targets or exit run rates. Multiple versions of guidance create investor trust issues.
- Management admitted they 'might have some NPA going forward next few years' despite current zero NPA record. Strategic decision to avoid tier-2/tier-3 customers to protect asset quality, which may limit growth optionality in slowing macro environment.
- Yield declined from 12.4% in Q1 to 11.5% in Q2 due to strategic pricing for Tata Motors and Mahindra & Mahindra anchors. While management expects yield recovery, competitive dynamics in anchor acquisition could pressure margins.
Key quotes
- We are confident that quarter-on-quarter earnings growth should be 10% on QoQ basis and when the company gets fresh equity in March April 2026 from warrant conversion, we shall go slightly aggressive in expanding the loan book but with the mindset that whatever comes on our table it has to have minimal or almost zero risk.
- What we believe is that 10 to 12% quarter-on-quarter EPS growth in Q3 and Q4 is possible. So we should be near about 120-125 crore of PAT which is slightly lower than what was earlier guided 150 crore for the full year. This is in the backdrop of slowing macro environment where businesses have not grown as expected.
- We also might have some NPA going forward next few years. But in comparison, supply chain finance is a much safer financing compared to other term lending or personal loan or business loan products.
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