Target: ₹124

CMP: ₹112.15

Lack of formal documentation and high distribution costs starve micro-enterprises of formal, affordable credit. Still, MSME’s about 30 per cen tcontribution to GDP and increasing land record digitisation drove around 24 per cent CAGR (FY20- 25) in secured MSME credit.

SBFC’s wide presence, function-specific verticals and early tech adoption aided 41 per cent AUM CAGR (FY18-25). Given <₹10 lakh ticket LAP’s low rural penetration, expect 22 per cent industry AUM CAGR (FY25-30E). SBFC’s LAP would clock 25 per cent CAGR.

For SBFC, we expect 21/16-17 per cent AUM CAGR/average RoE (FY25-35E) vs 19/15-16 per cent for affordable HFCs. Existing infra can support affordable home loan foray, potentially adding about 200bps to long-term growth. Prefer micro/small-ticket LAP plays (SBFC/Five-Star) to affordable HFCs due to 400bps/100-200bps higher AUM growth/RoE potential, driving 40-70 per cent premium to AHFCs.

Prioritising credit over sales, prudent provisioning and higher collections vs peers reflects proactive risk management. Management team led by long-time HDFC Bank veteran.

Affordable home loan foray can enhance long-term growth by about 200bps. For higher growth/RoE, micro/small-ticket LAP commands 30-60 per cent premium over affordable HFCs. Risks: Higher competition, staff attrition.

Published on June 30, 2025