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Investing.com - Investec (LON:INVP) has initiated coverage on SBFC Finance Ltd (SBFC:IN) with a buy rating and a price target of INR135.00, citing the company’s strong franchise in the secured MSME segment.
The research firm highlighted SBFC’s impressive 40% AUM CAGR over the past five years, accompanied by improving profitability and stable asset quality, though noting these metrics are not industry-leading.
Investec identified several factors contributing to SBFC’s resilience, including a leadership team experienced with various credit cycles, pan-India distribution, focus on secured lending, prudent liability strategy, strong second-tier management, and proactive responses to credit cycles.
The firm forecasts AUM growth of 27% CAGR for SBFC over the next three years with an exit ROE exceeding 15% in FY28E, while acknowledging challenges such as high employee attrition and low productivity.
Investec sees potential scalability challenges in the MSME book beyond Rs200 billion due to low employee productivity, but expects SBFC to offer a 15%-18% IRR from current valuations.
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