Detailed Narrative
Strong Financial Performance and Growth Milestones
SRG Housing Finance reported robust financial results for Q4 and full year FY26. The company's Assets Under Management (AUM) reached INR 1042 crores in FY26, marking a significant 37% year-on-year growth and crossing the INR 1,000 crore milestone. Net Interest Income (NII) for FY26 grew 31% YoY to INR 98.26 crores, while Profit After Tax (PAT) increased by 33% YoY to INR 32.49 crores. Disbursements for the year also saw a healthy 45% YoY growth, reaching INR 443.54 crores.
Improved Operational Efficiency and Asset Quality
The company demonstrated improved operational efficiency, with the Cost-to-Income Ratio declining to 63.14% in Q4 FY26 from 67.49% in Q4 FY25. Productivity metrics also showed improvement, with AUM per branch increasing to INR 10.86 crores and AUM per employee to INR 1.05 crores. Asset quality remained stable and healthy, with GNPA improving to 1.77% from 1.84% last year and NNPA at 0.65%, attributed to prudent underwriting standards and strong correction efficiency.
Strategic Expansion and Geographical Diversification
SRG Housing Finance is actively pursuing geographical expansion, having recently entered Maharashtra, Andhra Pradesh, and Karnataka. Management plans to further expand into Tamil Nadu and Telangana, with approximately 10 to 15 new branches targeted by the end of FY27. This strategy aims to diversify the portfolio, which currently has a significant concentration in Rajasthan and Gujarat, to achieve a more balanced AUM distribution across states in the next two to three years.
Specialized Underwriting for Underserved Self-Employed Segment
The company's business model focuses on small-ticket secured lending, with 94% of its loan book from rural and semi-urban markets and 79% from self-employed customers. Management highlighted their deep expertise in assessing these underserved profiles, which often lack formal documentation. Their underwriting involves on-ground teams visiting customers to understand cash flows, expenses, and the end-use of funds, using specific metrics and templates to manage risk effectively.
Funding and Capital Structure for Growth
SRG Housing's credit rating was upgraded to A- Stable by Acuité, reflecting improved business fundamentals and strong capitalization. The cost of borrowing improved to 10.88% in Q4 FY26 and is expected to decline further to around 10.70% in the next one to two years. With a capital adequacy of 38.62%, the company has sufficient headroom for growth. Management indicated plans to raise additional equity in Q4 FY27 or Q1/Q2 FY28 once leverage crosses the 5x-6x range to support its ambitious growth targets.
Efficient Collection Mechanism and Delinquency Management
The company's collection infrastructure is robust, with almost 97% of EMI collections done through banking channels. While Stage-1 assets (0-30 days delinquency) are high at 93.05%, management clarified that approximately 90% of bounced cheques are recovered within the same month through a process-driven system involving follow-up calls. Penal interest and charges are applied for delays, ensuring efficient recovery and minimizing long-term impact on asset quality.
Long-term Vision and Market Opportunity
Management expressed an ambitious long-term vision to grow AUM to INR 10,000 crores to INR 20,000 crores, with clarity expected in the next two years. They emphasized the significant business opportunity in the affordable housing segment, particularly in rural and semi-urban areas, where the loan book is still small relative to the population. The increase in average ticket size to INR 15.44 lakh is attributed to rising construction costs and evolving aspirations for better housing in these markets.