SG Finserve Ltd Q4 FY26 Earnings Analysis

- SG Finserve targets a loan book growth to INR 7,500 crores by March 2030, representing a 20% CAGR from current levels. - Annual loan book additions are planned at approximately INR 1,000 crores per year for the next several years. - The company aims to maintain zero NPAs while growing, emphasizing disciplined growth rather than aggressive expansion. - For FY '26, the loan book is expected to be around INR 3,500 crores, with a target of INR 4,500 crores by March 2027 (about 33% growth). - Growth targets are conservative to allow the new management team to settle and build confidence before accelerating growth. - Expansion into new business verticals (ARC, AIF, insurance broking, fintech) is at ideation stage, with no immediate investment or significant revenue expected in the next 2-3 years. - Supply chain finance remains the core focus area, expected to drive the majority of growth through deepened relationships and new anchors.

- SG Finserve targets a loan book growth to INR 7,500 crores by FY 2030, implying a 20% CAGR from March 2026 to March 2030. - Profit Before Tax (PBT) is projected to grow at a 30% CAGR over the same period, aiming for INR 500 crores in FY30. - This translates into a targeted return on assets (ROA) of around 5% and return on equity (ROE) of approximately 15% by FY30. - The company expects linear loan book additions of around INR 1,000 crores per year post FY26. - Emphasis on zero NPA growth to ensure asset quality. - New verticals (ARC, AIF, insurance broking, fintech) are at ideation stages; no significant impact on near-term profits expected. - The strategy prioritizes sustainable, steady growth with prudent capital leverage (2x-3x) and maintaining margins by managing funding costs and credit risk.

- Board has approved ideation for four new subsidiaries in ARC (Asset Reconstruction Company), AIF (Alternative Investment Fund), Insurance Broking, and FinTech businesses, but these are at a "drawing board" stage with no current business plan or investment. - No immediate capital investment planned; no decision to put even $1 into these subsidiaries in the next 2-3 years. - Expansion plans involving around INR 400 crores and approx. 30% equity for new verticals are just broad-based vision; no actual fund deployment or hiring planned currently. - Share warrants pending for subsidiaries funding are expected by April 2026 but might come earlier to strengthen the balance sheet. - The focus remains on growing the core supply chain lending business with a 20% CAGR target and zero NPAs. - The company aims to stay conservatively leveraged (2x to 3x) and is capitalized to grow efficiently without over-leveraging or risky investments.

- **Equity Fundraising:** - INR 338 crores additional equity expected by April 2026 via share warrants. - Total equity base expected to be around INR 1,450 - 1,500 crores beginning the new financial year. - Fundraising through share warrants is planned, with April as the due timeline, possibly earlier to strengthen the balance sheet by March 31, 2026. - No immediate plans to invest in new subsidiaries; any investment will happen after shareholder and board approvals. - **Debt Fundraising:** - Borrowing plans approved for INR 5,000 crores. - Currently dealing with 18 banks and 2 mutual funds for borrowing. - Leverage currently at 2x with plans to grow to 2.5x or 3x conservatively for balance sheet expansion. - Aim to maintain conservative leverage and strong capitalization to ensure growth with zero NPAs.

- The current average loan book (AUM) for Q3 is approximately INR 2,925 crores. - The company aims to grow the loan book to around INR 3,500 crores by March 2026. - Guidance is to add about INR 1,000 crores to the AUM each year, targeting INR 4,500 crores by March 2027, reaching INR 7,500 crores by FY 2030. - The aggregate Memorandum of Understanding (MOU) signed with anchors is more than INR 7,000 crores. - Actual AUM will be lower than MOU due to a multi-stage process of limits approval and utilization. - The MOU conversion to AUM typically takes about one year to reach meaningful stages, with additional natural growth thereafter. - The company plans to reach INR 10,000 crores loan book by 2030 through existing and new anchors.