Sangam Finserv (SANGAMFIN) Q2 FY27 Profit Growth Stalls as Finance Costs Double
The NBFC's revenue grew 32% year-on-year, but a 147% surge in interest expense and higher taxes squeezed its net profit margin.
Sangam Finserv's Q2 FY27 showed strong top-line growth but a sharp margin squeeze. While revenue rose 32% YoY, net profit grew only 12% as finance costs more than doubled, highlighting pressure from rising borrowing costs.
For a small NBFC, the path to profit lies in keeping the cost of funds low. Sangam Finserv's September quarter shows what happens when that equation flips, with revenue growth overshadowed by a sharp spike in borrowing costs.
The numbers tell a story of diverging trends. Revenue rose 32.1% year-on-year to ₹6.29 crore. Yet, net profit grew only 12.2% to ₹2.12 crore. The net profit margin contracted to 33.7%, down 590 basis points from a year ago.
Revenue & profit
Revenue (₹ Cr)
Profit (₹ Cr)
Net Profit Margin (%)
| Metric | CurrentQ2 FY27 (Sep 2026) | PreviousQ1 FY27 (Jun 2026) |
|---|---|---|
| Revenue (₹ Cr) | 6.29 | 14.94 |
| Profit (₹ Cr) | 2.12 | 9.89 |
| Net Profit Margin (%) | 33.7 | 66.2 |
Why the profit engine sputtered
The gap between pre-tax and net profit growth reveals the pressure. While profit before tax surged 36.8% YoY, net profit grew at just a third of that pace. According to a report by ScanX, this was primarily due to a sharp rise in finance expenses, which more than doubled year-on-year to ₹1.61 crore.
Higher borrowing funded an aggressive expansion of the loan and investment book. Total assets grew to ₹232.2 crore in September from ₹191.4 crore in March. This leverage-driven growth came at a cost, absorbing a larger share of incremental earnings.
A volatile run rate
The sequential comparison is even starker, reflecting the company's highly volatile quarterly performance. Revenue fell 58% and profit dropped 79% from an exceptionally strong June quarter. That prior quarter's 66% net profit margin was an outlier, driven by one-time gains and a low base.
This quarter's other income of ₹0.13 crore, while up sharply from nothing in Q1, included a ₹0.99 crore net gain on fair value changes, as noted by ScanX. Such non-operational income provides a buffer but does not represent core lending profitability.
The funding cost challenge ahead
The key question is how long the cost pressure lasts. The research indicates NBFCs are gaining ground in retail credit, especially in smaller-ticket segments. However, they generally face a higher cost of funds than banks. For Sangam Finserv, sustaining growth while managing this spread will be critical.
There is no published management guidance for loan growth or asset quality. The company's loan book composition, as of earlier disclosures, includes a mix of secured and unsecured corporate loans.
Key Points
- Revenue growth of 32% year-on-year was healthy, but net profit growth lagged at 12%.
- A 147% surge in interest expense was the primary driver of the margin squeeze, as the company leveraged up to fund asset growth.
- Quarterly performance remains highly volatile, with a sharp sequential decline from an exceptional Q1.
- Core profitability depends on the company's ability to manage the spread between lending yields and its rising cost of funds.
Hexa Perspective
The quarter underscores the fundamental tension in the NBFC model: growth is often debt-funded, and margins are hostage to borrowing costs. Sangam Finserv's 12-month trailing net profit margin of 31.8% is now below the latest quarter's level, suggesting the recent squeeze may not be a one-off.
The path forward hinges on asset quality. If the expanded loan book performs well, the company could regain operating leverage. If not, the double pressure of high finance costs and potential provisions could extend the profitability drought. Investors are weighing this risk against the stock's current P/E of 18.4, a slight discount to the industry.
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