I mostly agree with your thought process. MSME lending by default is v risky and v high growth can further increase the risk. Sunder finance is the place, CAPF would aspire to be after 2/3 yrs, when RoE improves to 17/18 % as per their vision/mission.
But oppportunity size is huge, If they have some loan approval system ( which they claim and have v low NPA 0.1% for last5 yrs, despite v tough markets, NPA in systembeing at all time high levels) simliar to gruh/repco, which help them sustain low NPA, market may reward them differently ( only time will tell).
IMHOCAPF isat a stage where SCUF was 3 yrs back.
Also, the cycle has even not turned for positive, one need to be careful when it turns negative after peaking - 2/3 yrs down the line
25-30 % growth by HDFC Bank for several years was achieved with low NPAs provided you have right system and processes, not like city financials etc. But I do agree 30 % loan growth in MSME is risky.
But I do consider it as a cyclical play and will do really well in interest rate cutting cycle. It can be seen as a highly leveraged trade ( high risk/high return, similar to psu banks etc.) where probability of success is relatively higher.
It is also a stock which needs market support to do well. I mean in bull markets, can do really well !
Disc : invested, views are biased, Std Sebi disclosures alsoapply !