SBFC Finance Ltd-BUY

CMP Target (Rs) Upside %
₹ 87
₹140
61%
SBFC, a financial company, is doing really well and looks like it will keep growing strong. Its stock is currently priced at 91 with a target of reaching 140. Here’s why:
  • Safe Loans: SBFC focuses mostly on secure loans, which means they lend money with properties as a safety net. About 98% of their loans are secure, and 84% of these are against houses where people live. This makes their business pretty safe and reliable.
  • Smart Management: Their CEO, Mr. Aseem Dhru, is well-known for making smart business decisions. He used to work at HDFC Bank and is good at spotting when the economy might be getting weaker. He can then make sure the company doesn’t take too many risks.
  • Not Bothered by New Rules: The Reserve Bank of India (RBI) recently made it harder for companies to give out unsecured loans (loans without any safety like property). But since SBFC mostly does secure loans, these new rules don’t really affect them.
  • Banks Like Them: Because SBFC has good management and focuses on safe, secure loans, banks are more likely to lend them money. This means they can borrow money at better rates compared to other companies that take more risks.
  • Growing Fast: SBFC has an Asset Under Management (AUM) of ₹5800 crores and they’re growing at 30% per year. They’re getting more efficient and saving costs as they grow, which means they can make more money.
  • Safe Loan Sizes: Their average loan is ₹9.9 lakhs, and they only lend about 42.6% of a property’s value. Most of these loans are for houses that people actually live in, which adds an extra layer of safety.
  • Expanding Reach: They have 171 branches in 16 states, and they’re planning to open more. There’s a lot of potential for growth because they’re not even in all parts of the country yet.
  • Good Profits: They make good money from the loans they give out (16.5%) compared to what they pay to borrow money (9.5%). This difference (spread) of 7% is likely to stay the same while their overall money management (AUM) grows by 30%.
  • Stock Value and Growth: The stock is trading at three times its expected book value for the financial year 2025 and 30 times its expected earnings. They’re expecting their earnings per share (EPS) to grow by 35-40% with a return on assets (ROA) of 4%. There’s a lot of room for them to grow in the market.
  • Trusted by Big Investors: Big investors like SBI MF and Ipru MF, who know the Indian market well, have invested in SBFC. This shows that they are a trusted company.
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