SBFC Finance Q2 FY27 Profit Rises 27% as Loan Book Grows, But Margins Narrow
SBFC Finance delivered strong revenue and profit growth in Q2 FY27, but rising funding costs squeezed its net profit margin to a five-quarter low.
SBFC Finance's Q2 FY27 profit grew 27% YoY to ₹139 crore, driven by a 27% jump in assets under management. However, a sharp rise in finance costs led to a 110 bps YoY compression in net profit margin.
SBFC Finance’s latest quarter shows a lender choosing growth, even as the cost of that expansion bites into profitability. The non-banking financier reported a 33% yearly jump in revenue and a 27% rise in profit, but its net profit margin slipped to a five-quarter low.
The numbers tell a story of robust top-line momentum. Revenue climbed to ₹546 crore, while profit reached ₹139 crore. Sequentially, both revenue and profit grew over 6%. Yet, the net profit margin contracted to 25.5%, down from 26.6% a year ago and 26.5% last quarter.
Revenue (₹ Cr)
Profit (₹ Cr)
Net Profit Margin (%)
| Metric | CurrentQ2 FY27 | PreviousQ1 FY27 | Same quarter LYQ2 FY26 |
|---|---|---|---|
| Revenue (₹ Cr) | 546.0YoY +33% | 491.5 | 410.8 |
| Profit (₹ Cr) | 139.0YoY +27% | 130.1 | 109.1 |
| Net Profit Margin (%) | 25.5YoY -4.1% | 26.5 | 26.6 |
The funding cost squeeze
Strong loan book growth was the clear driver. According to reports from Stockwatch and Quartr, assets under management (AUM) rose 27% year-on-year to ₹12,592 crore. The core secured MSME portfolio grew 18% to ₹9,669 crore.
This growth, however, came with a price. The Stockwatch report notes that finance costs surged 52% year-on-year, far outpacing the 33% revenue increase. The company’s debt-to-equity ratio widened as it borrowed more to fund its expansion, directly pressuring the bottom line.
Asset quality holds steady
Amid the margin pressure, asset quality provided a stable foundation. The gross non-performing asset (GNPA) ratio improved to 2.64% from 2.77% a year ago, as per the same reports. The credit cost, while at the upper end of management’s guided range, was described as “on-plan, not a miss.”
This suggests the margin compression is a story of funding, not deteriorating loans. Management’s focus on borrowers with higher credit scores appears to be keeping credit risks in check even as the book expands.
Key Points
- SBFC Finance’s AUM grew 27% YoY to ₹12,592 crore, fueling a 33% rise in revenue and a 27% increase in profit.
- Net profit margin fell 110 basis points YoY to 25.5%, primarily due to a 52% surge in finance costs.
- Asset quality improved, with the GNPA ratio declining to 2.64% from 2.77% a year earlier.
- The company is tracking inside its guided 5-7% quarterly AUM growth range, on course for a ₹15,000 crore AUM target.
Hexa Perspective
SBFC’s quarter confirms it can grow its loan book significantly while maintaining underwriting discipline. The trade-off is clear: profitability is being sacrificed for scale, at least in the near term.
The margin pressure from higher leverage is a direct consequence of this growth strategy. Investors are left weighing whether the current pace of AUM expansion justifies the compression in returns, especially with the stock trading at a premium to the industry. The path to improved profitability likely hinges on the company’s ability to stabilize its cost of funds as its book matures.
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