I consider this somewhat positive, because I don’t find their approach particularly aggressive. Q2 is still at ₹28 crore, and at this pace, I don’t think PAT will exceed ₹125 crore which falls short of their guidance. Hope the new leadership adopts a more aggressive strategy, considering the small base of loan book.
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Both have been selling in open market from last few qtrs. So, these exits were probably in making from quite some time…
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Company: SG Finserve Limited
Sahil Sikka (Key Managerial Personnel) SOLD 4213.0 shares, value Rs. 16.298 lakhs (Rs. 386.86 / share) through Market Sale.
Another vantage view could be that change in management is for good. The successors are named, have a good industry experience and would be given a proper handover. May be the new management brings in the promised growth current management could not? On share selling, may be their is a personal need?
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Sorabh Dhawan the CEO has joined another competitor Veefin Solutions.
@aadhar.aggarwal - I see you mentioned Veefin in your earlier comments. Curious what’s your take on this?
The credit rating mentions about the irrevocable corporate guarantee provided by S Gupta Holding Private Limited to SG Finserve
Although there is no mention on the use of those gurrantees
If someone has a more clear understanding on this pls share
This can be one of the reasons for there Zero NPA mentioned if the gurrantees are used for that purpose.
@Mayank_Jham The corporate guarantee (CG) would be provided by S Gupta to the lenders of SG Finserve, to secure their (the banks) exposure to SG Finserve.
This would not have any impact on the NPA levels in SG Finserve, as that is solely governed by the quality of loans SG Fin. itself is making.
The CG would come into play only in a case where SG Fin. is not in a position to pay back its own lenders, at which time the lenders will invoke the guarantee and ask SGupta Holding to pay the amount as a guarantor.
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Corporate Guarantees can be revoked only upon default by SG Fin serve and have nothing to do with NPA.
In fact, SG Finserv did have a bad loan of approx 5 cr and it never appeared in NPA as same was fully provided as a loss vy company in same quarter.
Veefin solution seems a tech company which provides solutions for NBFC & banks. So it won’t be a competitor.
Wouldn’t the business model be especially susceptible especially during times of slowdown/recession?
Just when the channel partners need most support, the stop supply agreements would cut their lifelines.
As I read more about this company, I think my biggest concern is the TAM. SG Finserve is looking at suppliers and distributors of anchor clients.
The large suppliers and distributors (AAA) can usually get bank financing at low rates. The really small ones are not worth lending to and can create excessive NPAs (This is what happened to the UGro supply chain financing business vertical).
The sweet spot in the middle might not be too large a market.
This probably explains why the company is foraying into providing loans to last mile retailers. But here the connection with the anchor might not be that strong and the stop supply agreement might not be enough incentive for recovery.
The issue was actually discussed in the Ugro concall of May 2024 (On Screener).
Curious to hear the communities thoughts on this.
Disc: Considering for investment
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Yes, they pulled out of the segment because of the issues I mentioned above.
The image above is Summary of concalls of Ugro Cap from Jan24 to Dec 24 highlighting key reasons why SFC of Ugro didnt worked.
- High COF 10.5% (Ugro) v/s SG (8.5%)
- Competition from Banks & NBFC
Also Ugro was having 70 + anchors in SFC but names are not publicly disclosed.
In SG Finserve , - SG Finserve’s anchor-led supply chain finance (SCF) model is maturing, now encompassing 45+ anchors like Adani, JSW, Tata, Havells, etc.
- Key evolution: Focus shifted from borrower-centric to anchor-centric underwriting, improving risk quality.
- Use of GST stack and AI for monitoring 6,000+ MSMEs in real time. This reduces turnaround time and improves asset quality visibility.
- 60%+ AUM is from listed entities, enhancing credit discipline and transparency.
- NIMs stable at 4–4.5%
Cost of funds: 8.5% (among lowest in NBFC peer set)
Yield on assets: 12.5%
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Yup agree with all your points. my concern is only the TAM. If the banks take the top tier vendors and the ones at the bottom are highly risky, then the addressable market is only that middle set of vendors. I don’t think this would be a sizeable segment.
But given that SG Finserve is only ~2500Cr loan book, it might still be adequate headroom for growth. I honestly can’t make up my mind on this. Hence looking for inputs.
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You need to clearly define top tier and bottom tier by revenue, so that we can quantify the TAM