SRG Housing Finance - A fast growing NBFC

This is my first new topic post on VP.

SRG Housing finance is a Udaipur based Housing Finance Company. It mainly provides 3 types of loans:

  • Loan Against Property
  • Individual housing purchase/renovation loans
  • Loans to builders for purchasing land, construction

Company’s outstanding loan portfolio has grown at a CAGR of 66.70 % over a five year period from Rs.5 crores as of March 31, 2011 to Rs. 38.67 crores as of March 31, 2015. Similarly, profit after tax has grown at a CAGR 70.60 % of over a five year period from Rs. 0.18 crores for Fiscal 2011 to Rs. 1.53 crores for Fiscal 2015.

FY 2014-15 AR has been released and is available [here] (

##FY 15 Highlights:

  • 46.5% growth in the loan book, 34.19% increase in the operating profit and 28.6% increase in PAT
  • Got sanctioned a term loan of 30 Cr from SBI
  • Migrated from the BSE SME platform to the BSE main board
  • Issued its first dividend of Rs 0.25 per share and bonus in the ratio of 2:5
  • Promoter shareholding increased from 45.4% to 49.6%


  • Company looking to expand its offices in tier 2/3 cities in Rajasthan.
  • FY 15 gross NPAs of 1.04% (net 0.76%)
  • Capital adequacy ratio of 50%


  • Limited geographical scale of operations. Currently headquartered in Udaipur with 9 satellite offices around it.
  • Promoters have floated other companies, a dilution in focus could be detrimental to the future prospects of this business.
    1. Satkar Finance Private Limited - NBFC
    2. SRG Global Builders Private Limited - Builders and Developers
    3. Hriday Insurance Consultant Private Limited - Risk Management Consultants
    4. Shri Nakoda Infotech Private Limited - Information Technology
    5. SRG Insurance Brokers Private Limited - Insurance Broking
    6. SRG Global Solutions Private Limited - Software, BPO, Information Technology
    7. S R G Securities Finance Limited - NBFC
  • MD’s salary is 22.86% (Rs 35 lakhs) of the FY 15 net profit. IMO this is quite high for such a small company.
  • Stock price has taken a beating, from a high of Rs 115 it is now down to Rs 47. Two bulk deals have happened in the past week at a price of around Rs 48.

Its current market cap is 53.7 Cr and it has a loan book of 38.7 Cr. At 1.4x the loan book I feel the company is fairly valued but a proven track record in growth and a small base leaves a lot of scope for further growth.

Disclosure: Not invested. Evaluating.


###An excerpt from the AR which I had difficulty understanding in:

During the year, the regulator for Housing Finance Companies (HFC)- National Housing Bank (NHB) stipulated that HFCs are required to create Deferred Tax Liability in respect of Special Reserve being created by HFCs. As a result, the reported Profit after Tax (PAT) gets adversely impacted. SRGHFL is of the opinion that generally HFCs would not be required to utilize Special Reserve since specific provisions towards Standard Loan Assets and Non Performing Loans are being made. Hence, in all probabilities, such creation of Deferred Tax Liability will not get crystallized in the long term period but HFCs will report lower PAT due to such accounting entry.

Can someone help explain the above?

HI @fabregas,

The above stated norms have been enforced by the NHB, with the procedure that the HFC’s need to charge an expense in their P&L statement and move the amount to the category of “Special Reserve”, the impact of this is that P&L statement wise there are lower profits, Balance Sheet wise there is a liability added as “Special Reserve”… this is the procedural part of it. this is more like a Deffered Tax Liability on the HFC’s Balance Sheet

The intention of the above is to ensure that the HFC’s have some more kitty of funds available during bad times, apart from the shareholder’s equity/net worth, and therefore before hitting the company’s networth, the HFC’s can reduce the amount in the “Special Reserve” category of funds… the HFC’s obv dont like since it reduces the profits of the company, but cashflow wise there is no impact on the company, since acc. to HFC’s the provisions being made by the HFC’s are itself there for NPA’s (Gross or Net) provisioning.

This is my very basic understanding of the special reserve… and i havent dug much into it.


Thanks @divygupta

The promoters have increased their stake in the past week. Promoter holding has increased from 49.6% to 54.6%.

P.S: I am not able to buy this script on HDFC securities. Have written to HDFC Securities customer care team yesterday. Haven’t heard back from them yet. Any possible reason for this? Can some one check if the same issue exists on other trading platforms? Would be great if you could let me know.

@fabregas could you please check and let us know how they are doing in asset liability mismatch and what kind of NIM they have? Along with NPA’s these are probably pretty important in valuing a housing finance company.

@madhug Allow me couple of more days to get back. Have been caught up with somethings at work.

@fabregas: are you still tracking this company ? Can you please share your latest views on this.

No I am not tracking this anymore. What put me off:

  1. The salary of promoters as a % of net profits was really high (the last time I checked, about 1 year back).
  2. Low volumes in trade per day (< 100). This suggests that most of the equity is locked up. The traded price is not a good proxy for the company’s valuation.
  3. High fluctuation in share price although the volumes are low.

Over the past few years I have realised that the promoter track record is more important than anything else. So now I tend to focus on companies with a longer track record in increasing share holder valuation.


Any update on this ?

Company has posted stellar September-17 quarter results.PAT is up more than 100%

Disclosure: Tracking

Anyone tracking this company ? Anyone who has visited branch can share their views.

Disclosure: Interested but not invested.

Results are out:

Why this stock is recording steep fall instead of good results , is there anything fishy with the promoters
I don’t find anything in the corporate news

Disc: invested small quantity

results are good but volumes are very low

Thanks @acido255 for the reply
here I want to understand what do you mean by volumes?? Is it loan book sanctions for the quarter
Is the company facing liquidity crunch?
Pls help me whether my understanding is correct or not?

Promoters bought more than 90K shares from open market.

Interest Payment and Principal Payment are done
Got refinancing from NHB of 5 crores

This company is not facing crunch of liquidity so much but due to sector as a whole …it’s being beaten… May be an opportunity to add

Hi @srinu63 I was referring to trading volume.
i found that it was high-frequency trading with low turnover rates. mostly possible in a bit illiquid small caps
trading companies use this to get long at their favorable prices.
or to get short in favorable prices for their clients or themselves
in this case, Promoters bought 90k shares without spooking prices :slight_smile: ,prices (120-125 levels)actually raised after the above transaction is announced.

SRG Results are out

This company has been making steady profits as can be seen on moneyworks4me.

Training 12 month earnings based P/E ratio is 6. The industry average is 24.

As per latest annual report, it now has branches (total 32) in Rajasthan, Maharashtra, Madhya Pradesh and Gujarat. NIM is around 12-13% and been this way for 5 years.

As per the forward looking statements in the latest annual report, they want to grow AUM by 3.5x by 2022.

Total remuneration for the MD as per latest annual report is 2.25 cr, which as a fraction of net profits is 16%, down from the 23% it was in FY15. It is still on higher side but since it is scaling sub-linearly, I do find the situation improving.

Does anyone know why the stock has fallen so much? Are there known red herrings wrt this company or stock?

Disc: Not invested but planning to invest 5-10% of PF in this company over next few months.

As far as stock as fallen which according to me is because of NBFC crisis. However, their asset liability mismatch is healthy. Maybe market has brought down stock same as all other NBFC stocks (except very very good companies like Bajaj Finance) which according to me is an opportunity.

Also, since company is growing at a healthy rate, valuations will eventually catch up if growth is maintaned. Key points to look out in coming results for 2-8 quarters will be addition of branches, loan book growth, asset quality, ability to borrow from market, etc.

Till now i am unable to find any red flags in company.