SBFC Finance Ltd (NSE: SBFC) reported a 34% year-on-year (YoY) rise in profit after tax for the third quarter ended December 31, 2025, reaching ₹118 crore. Total assets under management (AUM) expanded to ₹10,478 crore, reflecting a 29% YoY increase and a 5.4% sequential growth from the previous quarter. The company’s return on average assets (RoA) stood at 4.67%, supported by a spread of 9.04%.
The NBFC achieved a 29% year-on-year growth in assets under management, crossing the ₹10,000 crore milestone in December 2025. Improved operating efficiency and stable asset quality metrics supported bottom-line expansion for the quarter.
Key Development
A material milestone for the company in Q3 FY26 was the total AUM crossing the ₹10,000 crore threshold. This growth was primarily driven by the Secured MSME segment, which saw its AUM rise to ₹8,497 crore, representing 81% of the total portfolio. The company also expanded its physical footprint to 230 branches across 181 cities in 17 states and 2 Union Territories.
Financial Performance
For the quarter ended December 2025, total income rose 27.8% YoY to ₹426 crore. Interest income on loans contributed ₹393 crore to this total. Operating efficiency showed improvement as the cost-to-AUM ratio declined to 3.93% from 4.62% in the same period last year.
Asset quality remained relatively stable, with Gross Non-Performing Assets (NPA) at 2.71%, compared to 2.70% YoY. Net NPA improved to 1.48% from 1.63% in the prior-year quarter. The provision coverage ratio (PCR) increased to 46.21%. On a nine-month (9M FY26) basis, profit after tax reached ₹328 crore, up 31% YoY.
Business Outlook & Strategy
The company’s stated strategy remains focused on the underserved ₹5 lakh to ₹30 lakh ticket size for secured MSME loans. Management utilizes a 100% in-house sourcing and collection model to maintain credit standards. SBFC’s technology landscape, including AI-enabled underwriting and digital onboarding, supports this granular growth; currently, 88.6% of the secured MSME AUM is from customers with CIBIL scores above 700.
Sector and Macro Context
SBFC operates within a target MSME financing market estimated at ₹41 lakh crore, which has historically grown at a CAGR of 24%. The company maintains a diversified borrowing profile with 47.4% from bank rupee loans and 15.9% through co-origination. Its capital position remains robust with a Capital Adequacy Ratio (CRAR) of 31.70% and an AA- (Stable) credit rating.
Reasons for the Stock to Pass
While the headline growth is robust, certain metrics suggest caution for potential investors. Stage 2 assets increased significantly to ₹318 crore from ₹199 crore in the prior-year quarter. Disbursements for the Secured MSME segment were flat year-on-year at ₹699 crore and declined 14% on a sequential basis from the previous quarter. Furthermore, credit costs rose to 1.29% of average AUM, up from 0.97% in Q3 FY25. The company also notes that small-scale businesses lack resilience, making the portfolio potentially vulnerable to macroeconomic down-cycles.