Concall AI

SG Finserve — Q4 FY25 earnings call

Call held 9 May 2025

Management summary

SG Finserve reported a strong Q4 FY25, marked by significant AUM growth and stable profitability, despite earlier regulatory headwinds. The company is focused on scaling its supply chain finance business, expanding into retail, and maintaining robust asset quality and capital adequacy, with ambitious loan book and profit targets for the coming years.

Highlights

AUM grew 48% QoQ to INR2,326 crores by March 2025 from INR1,568 crores in December 2024.
Total income for Q4 FY25 was INR54 crores, a 27% increase from INR42 crores in Q3.
Profit before tax for Q4 FY25 stood at INR31 crores, at par with Q3.
Full year FY25 PAT was INR81 crores, up 3.85% from INR78 crores in FY24.
The company targets a loan book of INR4,000 crores by FY26 and INR6,000 crores by FY27.
ROE target is 18-20% and ROA target is 4.5-5%.
Average yield is 12.5% and borrowing cost is 8.5%, resulting in a healthy spread of 4%.
Equity base is INR1,015 crores, with visibility to grow to INR1,500 crores by FY27.

Key financials

2 periods

Headline

AUM
₹2,326 Cr
QoQ +48.3%
Total Income
₹54 Cr
QoQ +28.6%
PBT
₹31 Cr
QoQ 0%
Average Yield
12.5%
Borrowing Cost
8.5%
Spread
4%

FY25

PAT
₹81 Cr
YoY +3.9%

What they filed

Q1 FY27: revenue up 100.0%, net profit up 116.0% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	31	42	54	68	75 +142%	86 +105%	105 +94%	136 +100%
Expenses	10	9	4	9	6	6	6	10
Other income	0	0	0	0	0	0	0	0
Interest	0	1	19	25	30	36	43	54
Depreciation	0	0	0	0	0	0	0	0
Profit before tax	21	32	31	34	38 +81%	43 +34%	56 +81%	72 +112%
Tax rate	32%	26%	23%	28%	26%	25%	25%	25%
Net profit	14	24	24	25	28 +100%	32 +33%	42 +75%	54 +116%
EPS	2.53	4.24	4.26	4.39	5.08	5.81	6.48	8.15

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence

Debt Debt disclosed Cost 8.5%

Our average yield remains at 12.5% and our borrowing cost is stable at 8.5% giving us a healthy spread of 4%.
Liquidity Undrawn ₹1,500 Cr Sanctioned limits from 14 banks to fuel growth.

We've got 14 banks now and sanctioned limits of around INR1,500 crores and many others in discussion to fuel the growth for FY26.

Guidance & targets

Loan Book

Loan Book Target Loan Book · FY26 · High confidence INR4,000 crores

Looking ahead, we remain firmly on track to achieve our loan book target of INR4,000 crores in FY26 and INR6,000 crores in FY27.

— Sorabh Dhawan
Loan Book Target Loan Book · FY27 · High confidence INR6,000 crores

— Sorabh Dhawan

Profitability

ROE Profitability · Ongoing · High confidence 18% to 20%

while growing this loan book, we are being very prudent that we continue to achieve ROE of 18% to 20% with ROA of 4.5% to 5%

— Anubhav Gupta
ROA Profitability · Ongoing · High confidence 4.5% to 5%

— Anubhav Gupta
PAT Run Rate Profitability · Annualized current base · High confidence INR100 crores

H2 PAT achieved is INR48 crores that we can say that we are on a run rate of INR100 crores for the year on the current base.

— Sorabh Dhawan
PAT Growth Profitability · Next 24 months · High confidence INR300 crores

Previously INR100 crores → INR300 crores

So we are almost doubling the profit for the company in the next 12 months and then when we add another INR2,000 crores in FY27 that will give another INR100 crores to the PAT. So we are already talking about growing net profit to INR300 crores, at least, the run rate in the next 24 months from current INR100 crores.

— Anubhav Gupta
Cost-to-Income Ratio Profitability · Ongoing · High confidence Early double digits

So cost-to-income ratio for us has been amongst the best in the industry. We would be in early double digits when it comes to cost-to-income.

— Management

AUM

Quarterly AUM Addition AUM · Per quarter · High confidence INR500 crores

And we're looking at adding INR500 crores per quarter at 4% spread, which will add to this quarterly number, about INR10 crores to INR12 crores of addition would happen in this quarter-on-quarter basis.

— Sorabh Dhawan

Disbursements

Gross Monthly Disbursements Disbursements · When loan book reaches INR4,000 crores · Medium confidence INR3,000 to INR3,500 crores

The average churning days are about 35 days. So, when we will be reaching a loan book of about INR4,000 crores, gross disbursements monthly would be about INR3,000 to INR3,500 crores.

— Sorabh Dhawan

Debt

Debt-Equity Ratio Debt · Ongoing · High confidence 1:3

So as of today, we had envisaged that we'll be doing a INR6,000 crores book with a INR1,500 crores equity base and INR4,500 crores of bank debt, which is 1 is to 3. We continue to maintain that.

— Sorabh Dhawan

Operations

Average Churning Days Operations · Ongoing · High confidence 35-40 days

When it comes to churning days, our entire book rotates between 35 to 40 days.

— Management

Customer Retention

Customer Churning/Dropout Customer Retention · Annual · High confidence 5% to 10%

So if you say how many dropout, there is a 5% to 10% churning. Yes, it happens 5% to 10% churning is there due to competition.

— Sorabh Dhawan

Other

Retail Book Contribution to FY26 AUM Other · FY26 · Medium confidence 5% to 10% of INR4,000 crores

Okay. So the target AUM of INR4,000 crores for next year, how much percentage of that we are accounting for this particular account? Around 5% to 10% - 5%.

— Sorabh Dhawan

What to watch in Q1 FY26

Loan Book Growth

Next quarter (Q1 FY26)

Current INR2,326 crores (as of Mar 2025)

Target Progress towards INR4,000 crores by FY26

Why it matters

Verifies the company's ability to achieve its ambitious growth targets and expand its market presence.

Looking ahead, we remain firmly on track to achieve our loan book target of INR4,000 crores in FY26 and INR6,000 crores in FY27.

Risks & concerns

Macroeconomic headwinds and slowdown
medium

Facing macro headwinds in construction and consumer sectors, and slowdown due to low government spends and general elections.

Management acknowledged
Regulatory issues faced in H1 FY25
medium

Profit remained flat for FY25 due to regulatory issues faced in the first half, now stated to be behind them.

Management acknowledged
Shareholder expectations vs. current performance (low growth/flat profit)
medium

Analyst expressed concern about low growth and flat profit not meeting shareholder expectations, management requested patience.

Analyst acknowledged
Unsecured loans in the book
low

Some supply chain finance loans to large dealers are unsecured due to multiple banking arrangements, but company is working to convert them to secured.

Analyst acknowledged
RBI strictness on NBFCs regarding overcharging/high interest rates
low

Management stated their model is compliant, charges nominal rates (11-13.5%), and has received no customer complaints, indicating adherence to RBI guidelines.

Analyst acknowledged

Q&A highlights

7 direct

Top risks in supply chain finance and mitigation strategies Direct

monitoring of cash flows on day-to-day basis is extremely important. We are almost at the final stages of launching our AI based monitoring tool from where we will be extracting data from GST portal on monthly basis and capturing the sales, purchases, anchor wise, state wise, HSIN wise and also tracking the repayments done through our counter, which will help us keep a track, the borrowers have utilized the money in the right form and repaid back to us on time.

Details the company's proactive risk management framework, including AI-based monitoring and data integration from GST, crucial for asset quality in supply chain finance.

Asked by Rohan Mehta

Breakdown of fee income and other income Direct

So, fee income is a processing fee. And there is a other income, which was a provision which was done during the first nine months nd that provision has been written back. So, that provision was not required and that has been written off. So, that is the component which has been written back in Q4.

Clarifies the nature of non-interest income, specifically that a significant portion in Q4 was due to the write-back of a provision, indicating a one-time gain rather than recurring operational income.

Asked by Rohan Mehta

Low loan book target and flat profit despite AUM growth Partial

So, Gaurav, definitely, your concern is valid. And stock price performance is a function of a lot of factors. Yes, our profit remained flat for FY25, because of the regulatory issues, what we faced in first half with now everyone knows that is behind us and second half we bounce back so strongly, so sharply that from here on the foundation where we are standing, we are talking about tripling our net profit in next two years. So, I guess I would request you to remain patient as you have.

Directly addresses shareholder concerns about the company's growth ambition and profitability, with management acknowledging the validity of the concern while reiterating future growth plans and requesting patience.

Asked by Gaurav Agarwal

Reason for flat profit in Q4 despite AUM growth Direct

Gaurav, when we started Q3, bank financing was not available. We had access to some very low-cost debt from the group and that is the reason that there was profit. But Q4, there was no such support available. 100% book was created through bank debt only.

Explains that prior quarters benefited from low-cost promoter debt, while Q4's book was entirely funded by market debt, impacting profitability despite AUM growth, providing context for the flat profit.

Asked by Gaurav Agarwal

NIM outlook in a declining interest rate cycle Direct

So, Nemin, how does it work is that we have been able to extract better interest rates from the bank immediately after the rate cut. But have we passed on the entire benefit to the customers? Answer is no. Some partial benefit has been passed on. So, NIMs are expected to be better than earlier, when it is the downward cycle.

Provides insight into how the company manages its spread during interest rate cycles, indicating a potential for NIM expansion in a downward rate cycle due to faster repricing of borrowings than lending rates.

Asked by Nemin Doshi

Long-term vision, market opportunity, and Quick Commerce threat Direct

So, we are super confident that this business can grow to the scale which will be uniquely positioned as one of the only NBFCs which is supplying unique proposition, which is supply chain funding and bill discounting for the large conglomerates and groups who are highly focused towards the manufacturing. ... No, that continues in parallel. But this distribution network, some of our distributors also are suppliers through Quick Commerce. So, I think this supply chain financing is required on Quick Commerce side also. So, it will continue in parallel.

Outlines the company's strategic long-term growth path within supply chain finance, including downstream expansion to retailers, and addresses potential disruptions like Quick Commerce, showing adaptability.

Asked by Shubham

Discrepancy between reported nil NPAs and written-off amounts, and RBI's stance on NBFCs Direct

The first one, this account wasn't an NPA.This account happened there was a write-off of about INR11.4 lakh which has been taken by us. And that is why it is not considered as an NPA because the write-off has been considered by us... Our model just got clearance and all these aspects were checked. B, we charge only interest rates which are nominal between 11% to 13%, 13.5% and some one-time processing fee. There are no other charges which are levied to the customers and that is the reason that of two and a half years of operations, we have not received even a single customer complaint.

Clarifies the company's asset classification policy regarding written-off accounts and reassures about its compliance with RBI regulations, highlighting its transparent fee structure and lack of customer complaints.

Asked by Manish Kella

Status and target for the retail book, and nature of unsecured loans Direct

Akhilesh, so we have started to sign up memorandums or agreements with the large distributors where we will be doing retail. And we have already signed them for INR150 crores to INR200 crores and the penetration is underway... So these are also supply chain finance loans, but these are two large dealers, distributors, wherein security creation because of being into multiple banking has not been possible. But however, we wanted to be part of their arrangements and that is why we've extended these loans, but these are in normal course of business because these are pretty large dealers where other banks did not wanted us to enter. But I think we are pushing on regular basis to convert these into secured and we will keep on doing that.

Provides an update on the new retail segment, including initial targets and progress, and explains the nature of unsecured loans as part of supply chain finance with large dealers, along with efforts to convert them to secured.

Asked by Akhilesh Kumar

3 min read 7 chapters

Detailed narrative

Q4 & FY25 Performance Overview

SG Finserve Limited reported a strong Q4 FY25, with Assets Under Management (AUM) growing 48% quarter-on-quarter to INR2,326 crores by March 2025, up from INR1,568 crores in December 2024. Total income for the quarter was INR54 crores, a 27% increase from INR42 crores in Q3. Profit before tax (PBT) remained stable at INR31 crores, while full-year FY25 PAT reached INR81 crores, a 3.85% increase from INR78 crores in FY24, despite facing regulatory headwinds in the first half.

Growth Drivers and Business Model

The company's growth is driven by deepening relationships with over 45 anchor partners, including major conglomerates like JSW, Adani, Bajaj, Tata, and Vedanta. New additions in Q4, such as Tata BlueScope, Eastman, Havells, and Shyam Metalics, boosted the anchor MOU flow potential to INR5,500 crores, an increase of INR500 crores this quarter. The business model, focused on supply chain funding and bill discounting for large manufacturing groups, aims for an ROE of 18-20% and ROA of 4.5-5%.

Asset Quality and Risk Management

SG Finserve maintains robust asset quality with a stated nil Gross NPA. The company is implementing an AI-based monitoring tool that integrates data from the GST portal to track sales, purchases, and repayments, ensuring timely monitoring of cash flows. The average churning cycle of 35-40 days is considered small enough to absorb macroeconomic impacts. A write-off of INR11.4 lakhs in Q4 was an account previously provisioned for, not an NPA.

Funding and Capital Adequacy

The funding ecosystem has significantly strengthened, with 14 banks providing sanctioned limits of approximately INR1,500 crores. The company maintains a healthy spread of 4%, with an average yield of 12.5% and borrowing cost of 8.5%. The equity base stands at INR1,015 crores, with plans to grow to INR1,500 crores by FY27, supported by warrant conversions and plough-back of profits, enabling a target debt-to-equity ratio of 1:3 for a INR6,000 crore loan book.

Future Outlook and Growth Targets

The company is firmly on track to achieve a loan book of INR4,000 crores by FY26 and INR6,000 crores by FY27. Management expects to triple net profit from a current run rate of INR100 crores to INR300 crores within the next 24 months. Quarterly AUM additions of INR500 crores are targeted to support this profitability growth, with gross monthly disbursements expected to reach INR3,000-3,500 crores once the loan book hits INR4,000 crores.

Retail Expansion and Product Diversification

SG Finserve is expanding into the retail segment by signing MOUs with large distributors, targeting INR150-200 crores in penetration. This initiative is expected to contribute 5-10% of the FY26 AUM target. The long-term strategy involves expanding downstream to retailers, leveraging the existing value chain without adding significant risk, and potentially monetizing the collected data on buying patterns.

Regulatory Environment and Compliance

Management addressed concerns about RBI's strictness on NBFCs, stating that their business model has been cleared and adheres to regulations. The company charges nominal interest rates (11-13.5%) and one-time processing fees, with no other hidden charges, resulting in zero customer complaints over two and a half years of operations. This compliance focus is crucial for sustainable growth in the regulated financial services sector.

This is an AI-generated summary of a publicly available earnings call transcript.

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