Up 100% from its IPO price; brokerages see more steam left in this multibagger NBFC stock

SBFC Finance, a smallcap non-banking financial company (NBFC), which made its stock market debut on around two year ago, has been able to draw fresh interest of various brokerage firms, which see the stock hitting new highs on the back of rising growth and strong outlook for the shadow lender, leading to coverage initiation on it.

SBFC has carved out a strong franchise in the secured MSME segment, achieving an impressive 40 per cent AUM CAGR over the past 5 years with improving profitability and stable asset quality, said Investec. "Its RoA and asset quality metrics are not industry leading, but credible. While financial metrics are straight forward, we argue gauging long-term resilience is more complex," it said.

SBFC’s resilience stems from a leadership team who have seen various credit cycles; pan-India; focus on secured lending; a prudent liability strategy; strong second-tier management; and proactive responses to credit cycles. However high employee attrition and low productivity are notable challenges, said Investec in its IC report.

"We forecast AUM growth of 27% CAGR over the next 3 years with an exit RoE of more than 15 per cent in FY28E. We see challenges to scalability in MSME book, beyond Rs 20,000 crore) as employee productivity is low. We see SBFC offering a 15-18 per cent IRR from current valuations" it added with a 'buy' rating and target price of Rs 135 on the stock.

Shares of SBFC Finance Ltd rose nearly 7 per cent during the trading session on Monday to hit Rs 113.85, with a total market capitalization close to Rs 12,500 crore. The stock had settled at Rs 106.60 on the previous trading session of Friday. The stock is marginally shy of its 52-week high at Rs 117.15 hit on June 09, 2025.

SBFC Finance is set to capture a larger market share in the MSME credit sector. The penetration of secured MSME loans in rural households is around 3 per cent, indicating growth potential. SBFC aims for a 25 per cent CAGR in its MSME loan book from FY25 to FY30, expecting its market share to rise to 4.2 per cent by FY30, supported by geographical diversification and technological integration, said Ambit.

SBFC's strategy includes maintaining stable spreads of 8.1 per cent from FY25-28, leveraging pricing power in the sub- 1 million loan segment. Its growth involves a higher branch staff count compared to peers, enabling cost-flexible expansion. This approach should result in a 13 per cent CAGR in disbursements per branch, reducing operational expenses by 65 basis points, it said in IC report.

"With a robust ECL cover of 2.1 times, SBFC demonstrates prudent provisioning. This proactive management ensures credit costs remain stable at 90-100 basis points, highlighting the premium SBFC is expected to command over affordable housing finance companies," it adds initiating coverage with a 'buy and a target price of Rs 124.

SBFC Finance raised a total of Rs 1,025 crore via IPO, when the NBFC sold its shares for Rs 57 apiece. The stock is has nearly doubled investors wealth from its IPO price. Analysts, who have just initiated coverage on SBFC Finance, see up to 28 per cent upside potential in it.